The impact of tax incentives and changes in VAT rates on economic development and social stability

Abstract

Value added tax, as a general consumption tax, significantly influences the formation of price policy as well as economic competitiveness and economic development of country. This is especially evident in the changes in tax rates. The reason for this is the fact that, due to the existence of several types of tax rates, certain goods and services are taxed differently, and thus categorized differently. This categorization, ie. distribution of goods on luxury goods and goods of the wider public interest, has a direct impact on their consumption, as well as on their competitiveness, especially when it comes to the competitiveness of the same products in the markets of different countries. This paper will provide an analysis of the impact of tax rates (i.e. changes in their height) on these categories in the Republic of Serbia. In addition, we will point out certain social aspects of prices, since the level of these costs has influence on the level of real wages.