Rovna Dan: The Flat Tax in Slovakia

Laura  Alfaro; Rafael M. Di Tella; Ane  Damgaard Jensen; Vincent Marie Dessain

Case | HBS Case Collection | March 2007 (Revised March 2010)

Rovna Dan: The Flat Tax in Slovakia

by Laura Alfaro, Rafael M. Di Tella, Ane Damgaard Jensen and Vincent Marie Dessain

Abstract

Explores the tax policy choices made by Slovakia and the impact of reforms. Set in 2006, looks at the decision facing new Prime Minister Robert Fico as he faces the public's "reform fatigue." Traces the development of tax and fiscal policies since Slovakia's independence in 1993, focusing on the 2004 implementation of the rovna dan, or "equal tax," a drastic simplification of the tax system. A major theme is the impact of labor market and welfare reform, as well as the effective tax rates of both investors and workers. Another important theme relates to Slovakia's desire to join the EU and adopt the Euro.

Keywords: Investment; Governing Rules, Regulations, and Reforms; Policy; Taxation; Labor; Welfare or Wellbeing; Slovakia;

Format: Print

35 pages

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Citation:

Alfaro, Laura, Rafael M. Di Tella, Ane Damgaard Jensen, and Vincent Marie Dessain. "Rovna Dan: The Flat Tax in Slovakia." Harvard Business School Case 707-043, March 2007. (Revised March 2010.)

In late October 2011, after losing 1 billion of dollar reserves in one month, the Argentine government began imposing a series of currency controls, limiting the ability to buy foreign currency. As of October 2011, Argentina's tax collection agency AFIP had been granted the power to approve or reject all requests to buy dollars with pesos in Argentina's banking system. By June 2012, AFIP had removed "saving" as a legitimate explanation. While the official exchange rate was approaching six pesos to the dollar, the black market was demanding almost ten pesos to the dollar—a nearly 65% difference. These were not the first currency restrictions that Argentina had imposed on its citizens.

Case | HBS Case Collection | June 2018 (Revised August 2019)

Renegotiating NAFTA

Laura Alfaro, Haviland Sheldahl-Thomason and Sarah Jeong

January 1, 2019 marked the 25th anniversary of the North American Free Trade Agreement (NAFTA). Twenty-five years after the landmark trade pact was signed by the United States, Canada, and Mexico, considerable debate surrounded it. Trade and trade agreements were a focal point of the 2016 U.S. presidential election. NAFTA came into effect on January 1, 1994, after being backed by the Republican administration of U.S. President George H. W. Bush and the Democratic administration of U.S. President Bill Clinton during its implementation. It created the largest free trade area in the world at the time. Since implementation, total trade between NAFTA countries grew 280%; in comparison while trade to non-NAFTA partners grew by 195%. Critics of NAFTA claimed that it had contributed to a loss of manufacturing jobs to Mexico, increased inequality in all countries, and undercut environmental laws. Those who supported NAFTA, however, noted that in addition to trade, output, and overall employment, investment among the three nations increased, and productivity also grew. Furthermore, the agreement led to lower prices. By 2018, all countries experienced low unemployment rates. With changes in NAFTA looming, many questioned whether the accord had brought more benefits than costs to its signatories. Could the costs be minimized under a new agreement without reducing the benefits? Did buying local goods help create the most jobs in a country? What was the role of business? Everyone wondered what the potential ramifications of the new NAFTA, or lack of, would be.

Keywords: Trade; Negotiation; Agreements and Arrangements; Cost vs Benefits;

Citation:

Alfaro, Laura, Haviland Sheldahl-Thomason, and Sarah Jeong. "Renegotiating NAFTA." Harvard Business School Case 318-143, June 2018. (Revised August 2019.) View Details

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We characterize the agglomeration patterns of industries and plants in Europe, distinguishing Eurozone countries and the United States. Using a micro-level index, we quantify the degree of geographic concentration in industrial activities and explore how firm heterogeneity, industry attributes, and location fundamentals jointly explain the observed patterns. Our analysis shows that there is a clear hub-and-spoke structure in the geographic distribution. Larger and more productive plants, especially the superstars of each industry, are more centered than their smaller, less productive counterparts. The greater agglomeration surrounding superstars is particularly pronounced in the Eurozone but not present in the rest of Europe. Location fundamentals also play an important role and can sometimes mitigate the importance of agglomeration economies around large firms. Regions with different levels of economic development, including in education and technology, exhibit distinct agglomeration patterns. The findings suggest heterogeneity in the ability of regional policies to build superstar-centered industry clusters.

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Rovna Dan: The Flat Tax in Slovakia

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