Poland To Join Flat Tax Club

by Ulrika Lomas, Tax-News.com, Brussels

25 February 2008

Poland's Prime Minister, Donald Tusk, has announced that the government is seeking to bring into effect a single, low rate of personal income tax within the next four years.

Tusk told the commercial radio station RMF on Friday that the most realistic and likely year for achieving the flat tax would be 2010, or 2011 "in the worst case".

The government has yet to decide the rate at which the proposed flat tax would be levied, but a source familiar with the matter told Reuters that it would likely be 17%, with the effective tax rate reduced to 13% when family tax breaks and a tax-free allowance have been factored into the equation.

Under Poland's current progressive personal income tax system, there are three rates of 19%, 30% and 40%.

Poland would join a number of other countries in the region which have introduced flat personal and corporate income taxes.

Estonia led the way by flattening both individual and corporate tax into one rate in 1994 and has since been followed by Russia, Slovakia, Romania and Hungary, which has a flat corporate tax.

In November last year, Bulgaria's parliament approved proposals to implement a 10% flat tax - which would be the lowest flat tax rate in place in Europe, and one of the lowest throughout the world. The Czech Republic has also toyed with the idea of a flat tax.

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