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?

1 Answer

  • Anonymous
    9 years ago
    Favorite 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.

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