Discuss whether a reduction in taxation will always increase a country’s economic growth rate.
Answers should discuss role of different forms of taxation e.g., income tax, corporation tax, VAT.
Better answers will evaluate the potential limitations, and cases in which a reducation may or may not be effective.
e.g., bringing in concepts such as Ricardian equivalence (consumers are forward-looking, so a reduction is taxation is saved to buffer against future tax increases)
e.g., substitution effects (the tax reduction makes people work less)
e.g., specific types / targeted tax (tax cuts for the poor/rich)
AL
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