Why would the Romanian government reduce the VAT rate for food from 24% to 9% in 2015?

To increase its tax revenue, as lower prices boost food consumption.
7% (6 votes)
To increase its tax revenue, as lower taxes reduce tax evasion.
2% (2 votes)
To reduce the tax burden on poorer people, because VAT for food is a regressive tax.
87% (72 votes)
To reduce the discrimination of tax-paying supermarket chains vis-à-vis non-tax-paying markets and independent producers.
2% (2 votes)
To boost the tourism industry, which is strategic for Romania's development.
0% (0 votes)
To account for the reduction in government spending.
1% (1 vote)
To replace this source of revenue with other taxes that distort economic activity less.
0% (0 votes)
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.
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