Cripes, I need to get posted to Bulgaria which this week has introduced a 10% flat rate on its income tax.

From January 1 2008, income of physical persons in Bulgaria will be taxed at a flat tax rate of 10 per cent, Parliament decided on December 17, when it accepted in second reading changes to the Law on taxation of income for physical persons.

Income from life-insurance contracts after the end of the contracts, would be taxed at 7 per cent, Dnevnik dialy said.

Income taxes on dividend and liquidation of shares will be five per cent in 2008.

If nothing else this will cause further headaches in Brussels where the rise of tax harmonisation up the EU’s agenda continues in its inexorable fashion.
 
The Swiss canton of Obwalden (pop. 33,755) does even better with a 1.8% flat tax rate!

Obwalden has become the first Swiss canton to adopt a flat income tax rate, with more than 90 per cent of the electorate voting in favour of the move. The decision, announced by the authorities after a vote on Sunday [Dec. 16], comes after a court ruled the canton's previous degressive tax model unfair.

From January Obwalden will impose a rate of 1.8 per cent on all categories. The new model also exempts the first SFr10,000 ($8,700) of income from taxation, a measure designed to benefit those on lower incomes the most.

Voters also said yes to a proposal to slash corporate tax rates from 6.6 per cent to six per cent next year, the lowest in Switzerland along with canton Appenzell Outer Rhodes. [...] In Switzerland there is high competition among the cantons to set the lowest tax rates to attract wealthy individuals and companies.

This has attracted criticism both within Switzerland and outside its borders. European neighbours have frequently expressed outrage that their rich citizens are opting to empty their pockets into Swiss coffers rather than their own. But Switzerland has defended its position as providing healthy competition.

Experts say the lower corporate tax rates could add further fuel to a separate row between Switzerland and the European Union over alleged unfair business competition.

See also:

Walking on Water: How to Do It, 27 August 2005