Is the flat tax working in the Baltic countries

The flat tax rate is increasingly under scrutiny in West European countries as a model for taxation. Progressive taxation might be deemed as unsatisfactory to attract investment in the 21st century in a world of more global competition. Using macroeconomic data, this paper investigates whether the Baltic flat tax countries in Europe have higher growth rates than other transition economies. The findings are (1) the Baltic countries have higher growth rates than the control group. (2) Economic freedom and flat tax seem attractive to FDI, but mainly in the case of Estonia. (3) Economic inequality has not increased in the Baltic states despite low marginal income taxes.