My take on a certain comsumer tax.

A country has imposed a consumption tax of X%. The authorities does not clearly explain why this tax is imposed but merely mentioned that other countries have higher taxes and that there will be tax rebates for the poor.

Certain members of the public have pointed out that the main purpose of this tax is to fund the potential loss of revenue following the lowering of corporate taxes. However all these make no sense to me and I shall now try to present my views below. Note that I am no guru and i m just stating my views. I do not possess all the information therefore I have no authority to claim if government officials r making any mistakes. I truly hope that i can be proven wrong.

Regarding the lowering of corporate taxes. Ideally countries want companies to invest so as to provide employment for the people. This is exactly wat some people claim that the government is trying to do. hmm let us analyse this carefully...firstly...this certain country has claim an unemployment rate of 1-3% which economists believe is the country's natural unemployment rate(frictional unemployment). If that is the case...where can the country find its "extra workers" to fufill the new jobs. Supporting this argument, recently the country has also invest huge somes of money on Industry Y which it claims will provide many jobs for citizens in the future. Z x 10000 jobs will be provided. the interesting fact is that these jobs are roughly equal to the annual child births of the country. if we r to fully staff this industry...wat will happen to other sectors of the economy? Already the fallacy of industry Y can be seen in that foreign workers have been hired to staff the facilities. The story of industry Y clearly shows that the country is at "full employment" and there isn't much venturing to be done without the risk of crowding out.

No 2. Consumption taxes are distortionary. Taxes would only distort the purchases of individuals especially members of the lower classes. I am extremely disgusted by the fact that I can no longer order a usual delifrance meal with my daily budget. Expectations of a consumption taxes has already let to price hikes in certain stores!What happen in the end was that i had no choice but to conclude that outside food are too expesive for me. at current prices, I will spent 80% of my monthly allowance on food(since i have 2 out of 3 meals a day outside). This is atrocious. Anyway people like me will then choose to spend more time at home...watching TV is a lot cheaper than going out. What I fear is that my response is also shared by most members of the public which means lower consumption as a whole and less incomes for shop owners. At this point certain people will disagree w me, they argue that citizens' threshold has not been met yet, spending will continue. Perhaps this is true but I am just stating a potential problem using my ownself as an example to support an economic theory. As mentioned I CAN(and should...hopefully) be wrong. Just that it all make no sense to me.

No 3. The poor spend a greater percentage of their income that the rich. consumption taxes will seriously erode the pruchasing power of this group. Unless this grp is given X% of their income MONTHLY as compensation I can't see how equality can be achieved. To claim consumption tax will bring about equality is nonsense...the rich pay more in absolute terms but the poor in relative terms. As the savings of the poor gets depleted, their future generations will be even poorer.