Value Added Tax, in many countries, is the first source of tax revenue for government. But on the other hand, constitutes a burden for the consumer. Based on this, what do you think would be an efficient VAT rate that can ensure revenues for the government while at the same time will not heart the consumption and the economy?
I think that VAT rate is very dependent on the state. The State Office applying the lowest VAT rate in EU is Luxembourg with a tax rate of 17%. Hungary is the country with the highest normal tax rate of 27%. The EU average rate is around 21%. In my country the VAT rate is 20% and has the largest share in the country's revenue, but puts a burden on the consumer. Maybe the optimal VAT rate is 18%.
Best regards!
In my country (Argentina) the general Value Added Tax rate is 21%, but it is not definitely an efficient rate.
In my opinion it is very difficult and maybe senseless try to fix a general VAT rate for every country. It is necessary to analyze the consumer behavior for determining the most efficient VAT rate for a particular country within a specific moment. The “Laffer curve” is it an interested theory about this issues. I share this paper that could be useful for the discussion:
https://repositorio.iscte-iul.pt/bitstream/10071/9303/1/RESUMO%20&%20ABSTRACT%20RUBEN%20ESPANHOL.pdf
Thank you dear Zarkova and Rodolfo for your replies. I agree that we can not set a rate without taking into account the particularities of every country, but still, in my opinion, a rate of 15% can enhance government revenues without harming consumption. Such a low rate will also prevent tax evasion.
What do you think?
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