As of 1 January 2008, Bulgaria introduced a 10% flat tax applicable for all income levels, i.e., there is no non-taxable income threshold. Photo by Sofia Photo Agency

Greece should follow the example set by neighboring Bulgaria and introduce a flat tax, according to Forbes magazine.

Echoing the opinion of Steve Forbes, the 64-year-old publisher of the magazine, the article argues that the lack of decline in Greek government spending is due to general economic uncertainty, as well as the effects of the large tax rate increases on an already-overtaxed private sector.

"Bulgaria has a flat tax system with a 10% income tax rate and a 10% corporate tax rate. The VAT of 20% is rather high, but below that of Greece at 23%. I've suggested that Greece should follow Bulgaria's example. Introduce a flat tax system. Right here and now," the author Nathan Lewis writes.

"When Bulgaria did it, tax revenues actually rose 5.24% in the first year of flat-tax implementation, compared to the last year of the previous tax system. That's more of an increase in revenue than Greece's government has gotten from all of its tax-hiking "austerity" attempts," the article points out.

Over the last decade and a half, a number of countries introduced flat-rate taxation and Bulgaria jumped on the bandwagon in 2008.

Bulgaria's 10% flat rate makes it the country with the lowest personal tax rate among European Union member states. Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors.

The policy has a number of attractive features - equality, lower tax burden, the general trend to raise budget revenue as more companies leave the "shadow economy", just to name a few.

What made the debate in Bulgaria different is the fact that the proponents of the measure were the Socialists, while it is usually the center-right parties that are aggressively pushing tax reforms.

Part of the reason why the flat tax has been an efficient tool in diminishing the "grey economy" in other countries is the willingness of governments to couple it with draconic measures to crack down on tax evasion.

Even though it is a long-term goal, this kind of measures give the foreign companies the feel that things are going in the right direction and makes them more likely to invest their money in those economies.

Bulgaria, on the other hand, has notoriously been sluggish with its fight against corruption and organized crime.

Despite pressure from the Socialist opposition to scrap the flat rate, Finance Minister Simeon Djankov has been adamant that its introduction is one of the success stories of Bulgaria's economic and tax policy.