The Minister of Finance made it clear that a reduction in the VAT rate would require that the list of taxable items be expanded. I sympathize with the difficult choice set available to Minister Jordan. The political types played big politics with the VAT, which I have argued before, during and after the seminal 2011 election should not be reduced since it is the only way to tax the underground economy. I argued that reductions should go instead towards income taxes – particularly towards the poor, those doing legitimate work, and those filing returns and pursuing production consistent with a national industrial policy framework. Minister Jordan decided to levy the VAT on private education, several health services and water.
