VAT's regressivity : empirical truth or political correctness

The assumption that VAT is a regressive tax has had an immediate effect on the design of the tax in many countries and dominates policy debate when its introduction is under discussion. This article's starting point is the requirement that taxes must be fair. Since moral values change over time, the concept of fairness is not set in stone. Rejection of a VAT on the ground of its presumed regressive nature (unfairness) is merely a statement of political correctness, the validity of which can be empirically tested. In this article, the author examines the arguments for and against VAT's regressivity and, from a combination of perspectives, concludes that it is in fact a proportional tax.