November 8, 2007 7:14AM # Flat Tax Generating Big Results in Georgia By [Daniel J. Mitchell](https://www.cato.org/people/daniel-mitchell) --- SHARE Alvin Rabushka [has](http://www.hoover.org/research/russianecon/essays/10926656.html) some remarkable data on the positive impact of tax reform in the former Soviet Republic of Georgia. The economy has been roaring since the enactment of a 12 percent flat tax, with growth of 10 percent per year. And in news that should make the IMF happy, there’s been a big Laffer-Curve effect, with revenues rising dramatically as a share of GDP (though this should be a reason to cut rates even further): > Effective January 1, 2005, Georgia (the country, not the U.S. State) adopted a flat tax of 12%, replacing its previous four-bracket system. The flat tax was augmented with a 20% tax on corporate profits, 20% on social insurance (reduced from 33%), and 18% (reduced from 20%) on VAT. The new, simpler system has had a dramatic effect on economic growth, averaging 10% a year for the past three years, and taxpayer compliance. Tax revenue increased from 14.5% of GDP in 2003 to 22% in 2006, and should reach 24% in 2007. Between 2003 and 2007, the reforms reduced the number of taxes from 22 to 7. ##### Related Tags [General](https://www.cato.org/general), [Tax and Budget Policy](https://www.cato.org/tax-budget-policy) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).