Headlines

• From the 1990s onwards several countries in Central and Eastern Europe introduced flat personal income tax schedules to improve economic efficiency and tax compliance. However, flat tax systems raise concerns regarding their redistributive capacity.
• A recent JRC study shows that moving from flat to more progressive personal income tax schedules can have positive effects on both equity and efficiency, leading to reductions in income inequality and even to modest increases in employment and GDP.
• As there seems to be no strong trade-off between efficiency and equity, significant improvements could be achieved in income equality without hindering economic performance.