Taxes
expenditure. Different countries have different tax systems. Income taxes in most
countries are progressive. Estonia has had so far a flat tax rate which is quite
unique in the world. The problem with progressive taxes is that the marginal rate-
the tax people pay on any additional income - is always high, which is generally a
disincentive to both working and investing. The higher the tax rates, more people
are tempted to cheat. Some employers give highly paid employees lots of
perquisites such as company cars, free health insurance, and subsidized lunches.
Taxation Act in Estonia was passed in 2002. Taxes are divided into direct and
indirect taxes. Direct taxes are income taxes, gambling tax, land tax, social tax
and heavy goods vehicle tax. The income tax rate in Estonia is 21% and social
tax rate is 33%. In 2000 a corporate tax reform took place in Estonia. The goal
was to accelerate economic growth and make additional funds available for
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