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“In 2020 Saudi Arabia - the standard rate of VAT increased from 5% to 15%. Discuss...

In 2020 Saudi Arabia - the standard rate of VAT increased from 5% to 15%. Discuss the welfare effects of the VAT reform and its implications for business and taxpayers”.

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Expert Solution

Value-added tax (VAT) is the additional charges other than the normal selling price taken by the government from the consumer of the product, and these revenue earned by the government is used for the development of the country.
Tax reforms are often done by the government in which the rates of taxes are determined. Under tax reforms, sometimes the rate of VAT increases, which has some effects on the economy. Increasing rates of VAT always have a positive impact on the economy in the long run. Consumers often oppose the decision of the government of increasing the rates of tax as they have to pay higher prices for goods and services, but increasing rates of taxes will help the government to earn more revenue, and in the long run, the government can use this revenue for the development of the country.
Increasing rates of VAT affect the revenue of the businesses, whether big or small firms, as the price of their products increases, that is why firms want the rates of the tax to be less. Increasing tax rates also affect the taxpayers as they have to give more part of their income to the government.


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