Since 1994, the flat tax has become an integral part of the fiscal landscape in Central and Eastern Europe. Users of the flat tax include Estonia in the North, Russia in the East, Georgia in the South, and Slovakia in the West. These countries are joined by Latvia, Ukraine, Serbia, and Romania. The number is likely to rise in the next couple of years with Poland and the Czech Republic joining the bandwagon. Interest in the flat tax is also growing in both Hungary and Croatia.

Suddenly, the flat tax is beginning to take root in Western Europe, which is home to governments generally professing the "social market economy" consisting of higher taxes and redistributing income. But slow economic growth and unemployment seems to be changing minds. The flat tax is currently the centerpiece of tax policy debate in Germany, the United Kingdom, Greece, and Italy.

In Germany, the leader of the Christian Democratic Party, Angela Merkel, and possibly Germany's new chancellor, announced in late August the appointment of Professor Paul Kirchhof to her campaign team. Professor Kirchhof, who could become finance minister in the new German government, is well known for advocating a comprehensive 25% flat tax, which would replace the current system of three rates of personal income tax with a top marginal rate of 40%, and 25% on corporations. Kirchhof has argued that a flat tax would reverse Germany's long period of low growth and high unemployment.

In the United Kingdom, Chancellor of the Exchequer Gordon Brown recently came under fire for the Treasury's cover-up of a report about the pros and cons of a flat tax. The Treasury blacked out segments in the report which indicated the benefits of a flat tax and only released sections which described its defects. A copy of the full report was leaked to the media and it showed that a reduction in tax rates and burdens would in fact stimulate further economic growth, and that eliminating credits and exemptions would reduce tax avoidance and evasion. Leaders of the Conservative and Liberal Democratic parties have appointed commissions to report to their parties on the desirability of a flat tax. Earlier this year, conservative shadow chancellor George Osborne visited Estonia to observe its flat tax in operation and stated that the United Kingdom should consider its example.

In the middle of August, the Greek media reported that Prime Minister Costas Karamanlis and Finance Minister Giorgios Alogoskoufis were likely to announce at the Thessaloniki International Fair in September a plan to introduce a 25% flat tax which would replace the current system of three rates with a top rate of 40%.

Italy began debating a flat tax in the latter part of August. During an interview, Defense Minister Antonio Martino, who was formerly professor of monetary history and policy at the University of Rome and professor of economics at LUISS University, indicated his support for a flat tax. Martino was supported by the prime minister's economic adviser, Renato Brunetta, who is also a professor of economics.

A complete roundup of Western Europe would include Denmark and Finland, where small political parties have expressed an interest in the flat tax, and Spain, where two professors serving as economic advisors to the prime minister have written a paper in support of a flat tax for Spain.

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