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Overall, positive change is coming to Europe, Daniel
Mitchell, a Heritage Foundation fellow, wrote in the report. He
noted that tax competition – reducing taxes to spur growth – has
become a growing trend on the continent. Several countries in
Western Europe have lowered corporate taxes, and many of the
former Soviet bloc countries have enacted flat taxes.
Estonia has embraced economic freedom perhaps more than
any other former Soviet state, according to the report. Estonia’s
2004 score is slightly worse than last year’s, but help could be on
the way. Russia’s adoption of a 13 percent flat tax spurred
Estonian Prime Minister Mart Laar to say that his country may
lower its below 13 percent to complete.
According to the survey, Ukraine has shown little progress
over the year. In 1995, it scored 4.05, its lowest mark ever. Since
then, its scores have varied between 3.88 and 3.49 (its score this
year). Nations ranked 4.0 and above are considered repressed.
The study faulted Ukraine for non-tariff trade barriers
including non-transparent standards, cumbersome procedures for
agricultural certification, and import licenses. The nation’s top 40
per cent tax rate contributed to the low rating as well, but the
report acknowledged that a flat 13 percent rate would go into
effect next year. It noted, “foreign investment is impeded by a
number of formal and informal barriers,” including limitations on
the purchase of most land, and the “general lack of transparency in
Ukraine’s privatization program.”
The index also took note of the nation’s underdeveloped and
undercapitalized banking sector.
Cuba, at the top of the list of nations considered “repressed”,
has by comparison made significant improvements, working its
way up from a rock-bottom 5/0 score in 1996 to 4.08 this year. If
the trend continues, the island nation could improve enough to
break into the Mostly Unfree category next year.

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