International Tax and Public Finance

, Volume 15, Issue 6, pp 712–751 | Cite as

The “flat tax(es)”: principles and experience

  • Michael Keen
  • Yitae Kim
  • Ricardo Varsano


This paper reviews experience with the ‘flat taxes’ that have been adopted in many countries in recent years. It stresses that they differ fundamentally, and that empirical evidence on their effects is very limited. This precludes simple generalization, but several lessons emerge: there is no sign of Laffer-type behavioral responses generating revenue increases from the tax cut elements of these reforms; their impact on compliance is theoretically ambiguous, but there is evidence for Russia that compliance did improve; the distributional effects of the flat taxes are not unambiguously regressive, and in some cases, they may have increased progressivity (including through the impact on compliance); adoption of the flat tax has not resolved common challenges in taxing capital income; and it may have strengthened, not weakened, the automatic stabilizers. A key reason for adoption of the flat tax seems to have been to signal a fundamental shift toward a market-oriented policy regime. Looking forward, as the value of the signal diminishes and familiar political economy forces reassert themselves, the question is not so much whether more countries will adopt a flat tax as whether those that have will move away from it.


Flat tax Tax reform Income tax 


H20 H30 


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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Fiscal Affairs DepartmentInternational Monetary FundWashingtonUSA
  2. 2.Ministry of FinanceSeoulRepublic of Korea

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