Policy Tools - VAT

VAT is an important method of raising revenue for the government. It is an indirect tax as it taxes expenditure. Adjusting the level of taxes is a key part of the government's fiscal policy. It is possible to change the rate of VAT in the Virtual Economy model and see the effect on both macroeconomic variables and individual families.

To help see the effects of VAT changes on the economy, there are a variety of resources:

• An explanation of VAT and how it is charged
• Relevant theories about VAT and indirect taxes
• Worksheets to help see the impact of VAT changes in the Virtual Economy