May 14, 2007 10:26AM

Nonsensical Tax Analysis from Southeastern Europe

While many nations in the region are reaping enormous benefits after adopting a flat tax, Croatia has been a laggard. Tax rates are high and the burden of government is stifling productive forces. Yet politicians, academics, and business insiders are trying to convince themselves that the status quo is acceptable.

The Croatian tax system is not far behind the Austrian system, and is a competitive and modern system, said Christian Widhal from Vienna University at a round table on taxes held in Zagreb Monday. …“Don’t change taxes. Don’t practice on people as people are tired of tax changes. A stable tax system is fundamental for the stimulation of investments. Not even the rates are as crucial as stability, longevity and predictability of the tax system,” said [Chamber of Economy Chairman] Vidosevic. …Suker also brushed up on the discussion concerning a flat rate on income, profit and added value taxes, concluding that such a rate would not be profitable for Croatia, due to such specifics as the war aftermath.

Too bad nobody asked Professor Widhal why Croatia should seek to have a tax system similar to Austria’s. Unless, of course, Croatia wants to stumble along with growth of 1 percent yearly while its flat-tax neighbors grow by 5 percent annually. And too bad nobody asked the Chamber of Economy Chairman why stability is a good thing when tax rates are so high that economic activity leaves the country or goes underground. Last but not least, too bad nobody asked Finance Minister Suker why the tax system should be “profitable” for the government instead of the Croatian people.