Stability of tax burden

Abstract

A stabilised tax system is a necessary element of an efficient legal system. Assurance of stability of the tax system is crucial for tax payers, who can plan their undertakings over a longer period of time, without being exposed to the danger of tax rate changes. The most visible symptom of tax law stability is the stability of tax rates. The guarantee of fixed tax rates is one of the most important incentives for investors, who take it under consideration when estimating the risk connected with starting a new enterprise in a given market. Establishment of a stabilised tax system turns out to be very difficult in practice. There are several factors, amongst which the most important are: political background; sovereignty of lawmakers, who can almost unlimitedly define the level of tax burden; changes taking place in former socialist countries in the late 1980's and early 1990's causing radical tax system reforms; and, at last, the process of accession to the European Community, which required harmonisation of state law systems with the European one. The above makes one ask the question whether it is possible to create a stabilised tax system with all those factors around and eventually how to outline the area of stability.