I live in the U.K where we have 3 VAT rates: 0% (food, children's clothing, plants), 5% (some utilities, solar panels, insulation) and 20% (everything else). Our country only introduced VAT at 6% in 1973, something to do with EEC membership. Since then it has been creeping up over time, from 6% to 8%, to 15%, to 17.5%, then back down to 15% for a year, back to 17.5% and recently to 20%.
In many ways VAT is good tax as unlike direct taxation it does not in a way de-inventivise working and earning money. This is one of the reasons why indirect taxes like VAT and fuel duty are favoured by many, most notably here in the U.K by the Thatcher government (in her 11 year premiership she reduced the top rate of income tax from 85% to 40% and the basic rate from 33% to 25%, but at the same time increased VAT from 8% to 15%).
The problem with VAT is that it often is regressive, it hits those on lower incomes hardest as a proportion of one's income. However, this can be limited via having necessities such as food and utilities at reduced rates of VAT. Another downside of VAT is the fact that any rises will contribute to inflation for a year after they are introduced. It is estimated that January's 2.5% VAT rise contributes to roughly 1.5% of the U.K's 4.2% inflation at the moment. This is alongside an effect of potentially damaging growth. Contrast this to direct taxes such as income tax, although also damaging to growth, but where a rise can help restrain inflation and an economy's balance of payments deficit.
