Over a period of years, many European countries replaced their transac

Over a period of years, many European countries replaced their transaction taxes with a value added tax. Give two reasons why this was done.

What will be an ideal response?

ANSWER

The first reason why this was done was because transaction taxes are inefficient because they tax the same good multiple times. The second reason this was done was to “harmonize” income tax rates among members of the European Union so one country would not have a government-subsidized advantage over the others.