Thomas Sears, Professor of Accounting and Management at Hartwick College in New York will be spending his sabbatical studying the emergent taxation systems of Hungary, Bulgaria and Romania.
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“Bulgaria and Romania are both growing economies that face challenges with business development,” Sears is reported by the Daily Star to have said in a prepared statement. “However, the right taxation system could help both countries increase their pace of business development.”
According to a statement from the college, Sears research into levels of compliance and the extent and sophistication of underground economies is the developing economies and nations of Eastern Europe is among 22 research projects approved for funding by the Hartwick College Board of Trustees for 2005 – 2006.
As one of the most recent riders of a flat tax wave that began in Estonia in 1994, Romania is front and center in the debate about flat tax systems. The Dow Jones Newswires reports Romania introduced a flat 16 percent tax on both individuals and corporations at the start of 2005. Earlier this month in Bucharest, Romania’s finance minister, Sebastian Vladescu told reporters, including a representative of Dow Jones, “the value-added tax will stay at 19 percent, the flat tax at 16 percent and social security tax will be reduced by a percentage that will be decided within weeks.” A 3 percent increase of the value-added tax (VAT) for 2006 had been passionately debated among members of Romania’s ruling coalition seeking to make up lost revenues despite being projected to increase inflation to more than 6 percent.
According to the Sofia Echo, an agreement was reached last week regarding the steps needed to amend the Bulgarian Taxation Procedure Code by September 30 in order to meet a January 2006 launch date for a new National Revenue Agency. The new agency will perform central collection of taxes and social security contributions. The changes agreed upon this month are only temporary, as the Sofia Echo reports an entirely new tax code is being adopted next year.
Both Romania and Bulgaria hope to join the European Union (EU) in 2007, so their economic programs are attracting attention and scrutiny. Although their tax systems have not been in place as long as the tax system in the U.S., it is still possible that research exploring their experiences with both flat tax and implementing entirely new tax systems may help this country resolve some of our own tax issues.
The Daily Star reports that Sears’ project will examine the views citizens and officials in these countries hold on personal income tax, the simplicity and fairness of the tax systems being implemented along with levels of compliance. The effects of underground or shadow economies on business development will also be part of the research.