I’ve del.icio.us’ed this as well, but the conclusions of the study of the Russian flat tax are worth highlighting
Our Russian results have several important policy implications. The adoption of a flat rate income tax is not generally expected to lead to significant increases in tax revenues because labour supplies are believed to be fairly inelastic. However, if an economy is plagued by ubiquitous tax evasion, as was the case in Russia, then a flat rate income tax reform may lead to substantial revenue gains via increased voluntary compliance. At the same time, a strong evasion response suggests that the efficiency gains from the Russian tax reform perhaps are smaller than previously thought. Using observable responses of consumption and income to tax changes, we find that the tax-evasion-adjusted deadweight loss from the personal income tax is at least 30% smaller than the loss implied by the standard method based on the response of reported income to tax changes. While a flat tax offers tangible efficiency gains, its reduction of tax evasion may be most important.
We would of cause expect the Danish and Swedish tax systems to be less plagued by tax evasion. Or?
Update: As soon as I had published this, I noted that the Danish Tax Ministry just released a report about flat tax covering some of the same issues about tax systems and tax evasion. Suffice it to say that the ministry is less than enthusiastic about the effects of introducing a flat income tax in Denmark because of the regressive redistribution effects compared with the present system.