Taxpayers in the quickly growing former communist state say rates are too high, but the Government complains that too many people and firms pay too little tax

When Michal, a 30-year-old financial manager at a large firm in Slovakia, set up a cultural foundation two years ago, he did not do it for the arts. He wanted to avoid paying tax. Like tens of thousands of Slovaks the Government suspects of dodging their obligations, Michal went to great lengths to avoid paying the top tax rate of 38 per cent. Taxpayers in the quickly growing former communist state say rates are too high, but the Government complains that too many people and firms pay too little tax, leaving it struggling to finance schools, roads and other projects and services. That may soon be history because laws pushed through Parliament last month will introduce a flat 19 per cent income, corporate and value-added tax rate in January. The Government hopes the new system will ease collection, stop rampant evasion and boost economic growth ahead of Slovakia's entry to the EU in May. With a complex system that is strong on loopholes and weak on enforcement, Slovakia's 5.4 million people joke that avoiding and evading taxes is a national sport. Leaders hope the reforms will replicate Russia's experience, where the Government set a flat rate of 13 per cent and watched revenue soar almost 40 per cent from 2000 to last year.