While Romania’s 16 percent flat tax was the lowest in the European region when the country joined the European Union, this has since been surpassed by Bulgaria, with a 10 percent flat tax, and the Czech Republic, with a 15 percent flat tax.
Other countries in the region have also replaced the progressive system with one based on a flat tax. Slovenia cut taxes to 21 percent in 2008 from 26 percent in 2003. Slovakia replaced a 38 percent tax with a 19 percent flat tax. Lithuania cut six percentage points off its flat tax last year, reaching a 27 percent tax, followed by a further three this year, down to 24 percent.
“The 16 percent flat tax registered a great success in relaunching Romania’s economic growth, not only because it provided citizens increased buying power, but also because it made it less expensive for companies to hire top managers. Romania has a flat tax which is very competitive for company profits, which contributed to attracting investments,” said Patrick Leonard, Partner in the Tax Department of KPMG Romania.
According to the KPMG study, the world’s highest taxes are in Denmark, with a maximum 59 percent level in the past six years, followed by Sweden, with 55 percent, and the Netherlands with 52 percent.
