Slo­vakia’s Ivan Mik­los touts flat­tax ben­e­fits

Kyiv Post Legal Quarterly - - Contents - By Ilya Timtchenko timtchenko@kyiv­

Slo­vakian law­maker Ivan Mik­los is bring­ing his flat-tax, less-gov­ern­ment reg­u­la­tion ad­vice to two min­is­ters – Fi­nance Min­is­ter Natalie Jaresko and Econ­omy Min­is­ter Ai­varas Abro­mavi­cius.

He comes with top cre­den­tials. Mik­los, 55, was named as a top busi­ness re­former by the World Bank’s Do­ing Busi­ness re­port in 2004. In Slo­vakia, he served as deputy fi­nance min­is­ter and pri­va­ti­za­tion min­is­ter.

He's a be­liever in less gov­ern­ment in­volve­ment in the econ­omy. “All of my pro­fes­sional life is about re­forms,” Mik­los told the Kyiv Post in an in­ter­view on Dec. 8.

Ukraine’s cum­ber­some tax sys­tem to­day is sim­i­lar to what Slo­vakia had be­fore 2005.

“Which means it’s very com­pli­cated, it’s full of ex­cep­tions, de­duc­tions, spe­cial rates, spe­cial tax regimes, it is very dis­tort­ing… very low tax ad­min­is­tra­tion ef­fi­ciency, very high cor­rup­tion,” Mik­los said.

For Mik­los, price dereg­u­la­tion, lib­er­al­iza­tion and pri­va­ti­za­tion are even more im­por­tant than over­haul­ing courts and pros­e­cu­tors. His rea­son­ing is that by clos­ing down cor­rup­tion in busi­ness, there will be less law­break­ing.

Ukraine’s army of 54,000 tax of­fi­cials will be trimmed by 32 per­cent by year’s end, if Jaresko’s tax re­form pack­age will fol­low through.

But the best way to sim­plify life is through in­tro­duc­ing a flat in­come and cor­po­rate tax rate, which will make tax ad­min­is­tra­tion sim­pler and less cor­rupt.

Af­ter re­form, Slo­vakia's flat rate be­came 19 per­cent. Be­fore, rates ranged from 10 to 38 per­cent. It did not hurt the poor be­cause the gov­ern­ment raised the in­come thresh­old to qual­ify for ex­emp­tions of taxes.

“We tripled it… and we re­duced the mar­ginal tax rate,” Mik­los said. “The low in­come peo­ple in the new sys­tem are pay­ing in re­al­ity zero, be­cause their in­come is lower than the tax-free in­come.”

Ivan Mi­los, the for­mer deputy fi­nance min­is­ter of Slo­vakia and cur­rent law­maker, speaks in Ukraine's Cab­i­net of Min­is­ters on Dec. 12. (Volodymyr Petrov)

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