THE flat tax had its supporters in the United States long before George Osborne showed any interest in fiscal matters. It was the early 1980s when Robert Hall and Alvin Rabushka first made the case for a tax system so simple that anyone would be able to understand it.

The pair are today the oft-quoted heroes of the growing lobby in favour of doing for the US what the Conservatives’ Shadow Chancellor is suggesting should be done for Britain: simplifying the tax system.

Hall and Rabushka, whose book — influential but not influential enough — was published in 1985, advocated a single rate of tax for companies and individuals alike. They were very clear that the only deductions should be a personal allowance but that interest would not be taxable; nor would dividends, rent or capital gains. Theirs was not simply a tax on spending, which is now being advocated by some in the US, but the idea of a system that would at least encourage saving, as well as being straightforward.

Here, Congressman John Linder, of Georgia, recently said that “we must lift the foot of our tax system off of the neck of our economy and free the American worker and the American consumer”. His own campaign is for a “fair tax”, which in his view would be levied solely on spending. That would be regressive, but UK companies and individuals will recognise the overall truth of his sentiment. His broad aspiration, to get the deadening weight of the tax regime off the backs of its productive sectors, is surely right.

But while the great interest in the concept of a flat tax in the US remains meat and drink for the policy wonks of Washington and New York, closer to home, in Eastern Europe, businesses and individuals are already savouring the real benefits and finding them much to their taste.

It is a big irony of the flat tax idea that, while its greatest advocates have been Americans like Hall and Rabushka, it has taken the former communist states of Eastern Europe to make it an everyday reality. In various forms, flat, or at least flatter, tax has now been adopted in 11 European countries. Russia has introduced a system with a single main rate of 13 per cent. In Germany, the opposition leader, Angela Merkel, has said that the concept may have much to recommend it. Across Europe, a wave of tax competition is being unleashed.

With admirable candour, Mr Osborne concedes that any move towards a flat tax regime in a complex developed economy like Britain would be far from straightforward. There are considerable obstacles. But the same is generally true of any worthwhile reform.

Despite this, Adam Smith’s basic principles of good taxation, of which the Shadow Chancellor reminds us, remain as valid today as ever: fairness, simplicity, efficiency and transparency. These qualities could only be enhanced by flat tax.

Many will ask what a likely rate might be. In the US, one calculation pointed to perhaps 19 per cent, but this was in 1995, since when government spending has risen, just as here.

In Britain, spending curbs might well be required to ensure the full gains of stronger growth and incentives that a flat tax should deliver. But Mr Osborne is surely right to point out that there is scope for spending to go down, rather than relentlessly and wastefully rise, as it has under Mr Brown.

The flat tax is far from an easy solution. But if fairness, simplicity, transparency and dynamism were the results, these are surely worth weighing against the Brown alternatives: stealth, complexity, growing unfairness and a stifling of enterprise. These are ills that would provoke a new revolution on this side of the Atlantic.

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