In the United States, when we debate whether tax cuts can stimulate a sluggish economy, we are typically thinking of income tax cuts. But such cuts tend to maximize inequality and are also slow to have an impact (not everyone has an income-generating opportunity sitting in front of them just waiting for a lower tax rate).
Many other governments around the world have an additional policy alternative available, which is to cut value added tax. VAT runs as high as 25% in some countries. Unlike an income tax cut, a VAT cut would be felt instantly and would be progressive in impact.
My bleg: Has any country tried a VAT holiday to stimulate their economy, and if so what happened? If there are no policy experiments, are there any modelling white papers at which I could take a look?
Thanks in advance.