Former Estonian Leader Recommends ‘Flat Tax’

September 22, 2006

Former Prime Minister of Estonia Mart Laar this week recommended that the Costa Rican government consider applying a “flat tax” to improve its economy, as Estonia has done in recent years.

Laar was in Costa Rica Monday and Tuesday, and met with Minister of the Presidency Rodrigo Arias, Central Bank president Francisco de Paula Gutiérrez and Production Minister Alfredo Volio, among other officials.

A flat tax “could be applied in any country, and in most of the countries where it has been applied, it has shown satisfactory results.

In Estonia, which has a large population of farmers, it has reduced inequality, created more income for the government and lowered the poverty rate,” Laar told journalists.

Laar said that in Costa Rica, a “flat tax” – which replaces multiple tax rates with two fixed rates – would have excellent results, considering that there are trained people to apply it and a government that would allow for controlled tax collection.

Minister Arias said after the meeting that “for the government, it has been very useful to listen to his experiences,” although he said the possibility of applying a flat tax will have to be analyzed.

During the next few weeks, Laar will send the Costa Rican government information about the tax-reform projects he carried out in Estonia, and it will be analyzed by the Finance Ministry, Arias said.

Laar was the Prime Minister of Estonia from 1992-1994 and 1999-2002, during which he supported the implementation of tax reforms that allowed the country’s economy to grow 7% per year, almost eliminating unemployment and poverty. Through these reforms, Estonia achieved a better growth in per-capita income than all the former Soviet Union states.

 

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