Flatliners: Ideology and Rational Learning in the Diffusion of the Flat Tax

the offices of their foreign counterparts (Carothers, 1999). Countless well-attended confer-
ences on “lessons learned” from other countries’ experiences in economic reform abounded
throughout the region, providing a direct opportunity for policymakers to learn about the
workings of the flat-tax.

One of the main architects of the Slovak flat tax reforms, L’udovit Odor, described
the presence of the flat tax reform in the prosperous Baltic countries as an empirical
illustration for the reform. The flat tax had in fact been on the party platform of two of
the parties in the Dzurinda coalition. “There was huge political will to have a simpler
tax system. ... We considered many reforms in those days, and the test cases in the
Baltics and Russia provided some data points for the reform,” he says. “It is very hard
to compare regions, but finally we had some empirical evidence that the flat tax worked
in some cases. So we took the basic idea and then analyzed how far we could go with
it.”¹⁷ This supports the rational learning framework—in fact, Odor is a self-described
good friend of Estonia’s Laar, and consulted him extensively throughout the period of
adopting the tax.

Another motivation for flat-tax adoption is to encourage domestic collection of taxes.
Compliance with tax payments after the introduction of the reform has been widespread
and by some accounts staggering; one economist estimated a 79.7 percent increase in
Russian tax revenues after the introduction of the flat tax.¹⁸ As a recent IMF report put
it, “the common circumstances and tax practices of these countries — creating market
economies with little experience of tax payment by individuals and largely dysfunctional
tax administrations — are relatively conducive to beneficial compliance effects” (Keen,
¹⁷Author interview, L’udovit (Odor, National Bank of Slovakia, 23 July 2006.

¹⁸Alvin Rabushka, “The Flat Tax at Work in Russia: Year Three.” Hoover Institute comment, 26
April 2004.

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