Policy Communication Seminar

Is the Flat Tax Experiment a Failure?

Talk by Michael Keen, Fiscal Affairs Department, IMF


Leonard Burman (Senior Fellow at the Urban Institute and Co-director of the Urban-Brookings Tax Policy Center)

Kevin A. Hassett (Senior Fellow and Director of Economic Policy Studies, American Enterprise Institute)

January 25, 2007; 1:00-2:30 pm
IMF HQ1-Auditorium, RD-710

720 19th Street NW, Washington, DC

Open to Fund/Bank Staff and the Public

The adoption of a "flat tax" by several countries is one of the most striking economic policy developments of recent years. While Russia's adoption attracted the most attention, a flat tax is also in place in several countries, like Estonia, Lithuania, Latvia, Ukraine, Slovak Republic, Georgia and Romania, and on the policy agenda of several others. How successful has this experiment been? Mick Keen, drawing on his work with Yitae Kim and Ricardo Varsano, suggests that neither economic theory nor empirical evidence so far provide unambiguous support for the claims of proponents that flat taxes boost work incentives and compliance with tax laws. But nor is there unambiguous support for the claims of flat tax critics that it is inequitable and weakens automatic stabilizers. Keen predicts that "looking forward, the question is not so much whether more countries will adopt a flat tax as whether those that have will move away from it."

A roundtable discussion will follow the talk.

Please note that due to enhanced security arrangements:

1. An RSVP is required: EXRPOLICYCOM@imf.org or (202) 623 9430.

2. Guests please present a photo identification and use the IMF Center entrance at 720 19th St. N.W. Washington DC (at the white tent). Only IMF/World Bank staff should enter through the main 700 19th St. entrance.