Luxury goods are not essential and are often associated with high-income individuals who can afford to pay more. Therefore, increasing VAT rates on luxury purchases can help generate additional revenue for the government without hurting the majority of the population.
According to a report by the European Commission, luxury goods sales have increased by 5% annually in recent years, and the market is expected to continue growing. By increasing VAT rates on luxury goods, governments can benefit from this growth and generate more revenue to fund public services and infrastructure projects.
Read moreMoreover, research has shown that consumers of luxury goods are less price-sensitive than those purchasing essential items. This means that an increase in VAT rates on luxury purchases is unlikely to deter consumers from buying these items, and the increased revenue generated can be used to fund social welfare programs, healthcare, education, and other essential services that benefit the general population.
Therefore, increasing VAT rates on luxury purchases is a reasonable and fair measure that can help generate additional revenue for the government without significantly harming the majority of the population.