Quote:
Originally Posted by Slava
Well it could be that a pure consumption tax is unrealistic, but there are plenty of examples of countries that rely on higher consumption taxes for their funding.
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But then what does that really achieve? You still have the administrative burden of running an income tax system, while having high consumption taxes which can depress domestic consumption.
And such a move would penalize older people without a proper (and expensive) transition plan. They've saved after-tax money for retirement on the premise that their tax burden will be lower in retirement with their lower income, but now all of the sudden their consumption would get significantly more expensive. And the same would apply to any low-saving demographic (generally lower-to-middle income) whose tax burden would likely increase.
That's not to say that increasing VATs can't be a good idea, but a wholesale change to the tax system is likely to introduce more problems than it solves.