What would happen in the Government decided to reduce income tax and increase goods and services tax?
the tax revenue collected still remains the same
what would be the consequence to a household?
- Anonymous9 years agoFavorite Answer
disposable income increases - your salary is the same but less tax so more cash
Things cost more - so inflation which generally triggers spending
So potentially people would spend more to get the same goods.
Obviously the different rates of tax will make the reality more complex. It could act as a means to get the economy moiving though the true benefit comes where people buy home produced goods as opposed to imports.
If the population were in debt and interest rates high, the effect might be to have them repay debt which would cut tax revenue without affecting demand.