The International Herald Tribune reports that the new government in Estonia plans to lower the rate on the flat tax from 22 percent to 18 percent. Estonia already ranks as one of the world’s most laissez‐faire economies. Reducing the flat tax rate — which was originally imposed at a rate of 26 percent — will further enhance Estonian competitiveness and increase the power of tax competition in Europe:
Estonian lawmakers on Wednesday gave Prime Minister Andrus Ansip the go‐ahead to form a new center‐right government that is expected to cut the Baltic country’s flat income tax. …Ansip’s center‐right Reform Party, the conservative IRL union and the centrist Social Democrats agreed earlier this week on a coalition platform. They plan to continue market‐friendly policies in the country of 1.3 million, including reducing the flat tax from 22 percent to 18 percent by 2011. High‐tech Estonia has one of the European Union’s fastest‐growing economies, and some economists credit the flat tax, which means everyone pays the same tax rate as opposed to the progressive rate that most European countries use.