Basically, this article has everything you could ever want to know about Value Added Tax.
Two things going on here- first, the effect on businesses. With a new increase in VAT businesses will either have to raise prices (which would do what to demand, given Price Elasticity of Demand?) or cut into profits (which no business likes).
Second, what is the wider effect? The article mentions that increased VAT could lead to higher inflation rates. What is inflation, and why would the VAT increase contribute to higher inflation levels?
Finally, perhaps the most interesting part of the article is the idea that VAT is a 'regressive' tax, meaning that it hurts poorer families more than rich ones. Poorer families spend more of their income on consumption, so this tax hits them more. Is that right? Is that fair?
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