What is one effect of lowering VAT rates on businesses?

Lowering VAT (Value Added Tax) rates generally leads to increased sales for businesses. When VAT rates are lowered, the prices of goods and services become more attractive to consumers because they pay less tax on their purchases. This reduction in price can stimulate demand, leading to increased sales volume for businesses.

Consumers are more likely to make purchases when they perceive that they are getting a better deal, and this can lead to a boost in overall consumer spending in the economy. Consequently, businesses may benefit from higher sales figures, which can help to offset any potential loss in revenue that might arise from the reduced tax rates.

As for the other options, while they may describe outcomes related to VAT rates, they do not reflect the direct effect of reduced VAT on businesses. For example, increased government revenue typically occurs when VAT rates are higher, not lower. Reducing affordability of products contradicts the expected outcome of lowering VAT, as lower tax rates generally improve affordability. Decreased demand for goods would also be an unlikely effect of lowering VAT, as the intention is to enhance demand by making products cheaper for consumers.