EUROPEAN TAXATION - BETWEEN FLAT AND PROGRESSIVE TAX

The paper presents the tax rates applied in the European Union, with a comparison between the progressive and the flat tax. In the first part, we discuss about general characteristic regarding the tax system in Europe, fiscal policies applied and about particularities of the two tax rates: progressive and proportional. We started specifying the reasons that brought to the forefront the flat tax in the European tax system and then we countinued by highlighting the advantages and disadvantages of progressive taxation on the one hand and of proportional taxation on the other hand. Making this comparison and analyzing different relevant opinions, we think that the choice of the right tax system can not be the same for each Member State because there is no general valid answer. Moreover, this choice has a fairly large political implication and this idea may be a possible interpretation of the fact that the flat tax has been embraced in Europe by the post communist countries. Further, we analyzed the effects on the budget revenues brought by the flat tax in the fiscal enivronment and we correlated them with the tax structure of each mentioned country. Theoretically, if we consider that the flat tax brought benefits in the tax system, Member States should record growth in the budget revenues, due to the reduceed tax evasion and increased foreign investments. So, we compared the volume of the budget revenues in two different periods of time: before and after introducing the flat tax. We observed that the flat tax didn't had the expected effects because the budget revenues had not suffered a positive evolution by changing the way tax percentage is applied We also brought the discussion current European fiscal approaches regarding the tax rates and we found that starting with 2013, some post communist countries had returned to progressive tax system. In the end, we emphasized the conclusions obtained with this paper.