To increase its tax revenue, as lower prices boost food consumption.
To increase its tax revenue, as lower taxes reduce tax evasion.
To reduce the tax burden on poorer people, because VAT for food is a regressive tax.
To reduce the discrimination of tax-paying supermarket chains vis-à-vis non-tax-paying markets and independent producers.
To boost the tourism industry, which is strategic for Romania's development.
To account for the reduction in government spending.
To replace this source of revenue with other taxes that distort economic activity less.
Total votes: 83
Learning objectives:
Understanding the effects of a tax on government revenue, consumer prices, producer prices and economic activity.
Understanding the relationship between elasticity and the efficiency of a tax.
Understanding that the demand for food is relatively inelastic, and that the VAT for food is a relatively efficient tax.
Understanding the difference between a proportional, a progressive and a regressive tax.
Understanding that VAT on food is a regressive tax.
Understanding that government leaders face trade-offs between efficiency and equity when designing their tax systems.
Identifying the winners and losers from a tax cut.
Presentation videos: