When a country is on the downward sloping side of the Laffer curve, what will cutting tax rates do?

When a country is on the downward sloping side of the laffer curve, cutting tax rates will help in increasing the tax revenues. The tax revenues will be maximum at the optimal point of the Laffer curve. You can read about the Taxation System in India – Types, GST, VAT, Objectives, Limitation, Laffer Curve in the given link.

If the country was on the upward slope of the Laffer curve, cutting tax rates would have reduced tax revenues and increasing tax rates would have increased tax revenues till it reaches the optimal point of the Laffer curve.

Further readings:

  1. Global Minimum Corporate Tax – Minimum tax rate proposed by the G7
  2. Base Erosion and Profit Sharing – Strategies used by Multinational Companies

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