Many countries have multiple VAT rates for different goods. Staple food and other basic goods, which constitute a larger part of a poor person's spending, are in lower rates.
And the rates used to be - by today's numbers - ridiculously low, but over time it became a nice and succulent teat to milk.
Given your comments, we seem to be similarly minded. What do you think about a wealth tax? To me, that would be the most appropriate given that incomes can vary year to year. Corporate taxes are a separate matter altogether, IMO, since corps just include their tax burden in the price of the products.
edit: What I'm thinking is some sort of total asset valuation placing one in a given bracket, rather than income level. While income tax is income tax, regardless of short-term/long-term capital gains (35%/15%, USA), or salary.
How well would that apply to assets that are hard to measure the value of? Ie a house, a business or a painting even. I think it would encourage a system where people somehow minimize what their assets appear to be worth - or how well they can be measured.
Given how Prop 13 was enacted to not push existing homeowners out of their homes if their property values increased significantly, would there be a similar push under such a system?
VAT is a trivial tax to avoid since it involves the business letting the tax department know how much tax they collected. So what happens is that they under report either (a) by flat out lying or (b) doing more business in cash or through a barter system.
Also it is incredibly regressive rewarding the rich (who are generally hoarding money not spending) and punishing the poor (who spend a larger portion of their wealth on consumable spending which is subject to VAT).
That's why many countries have a VAT but none of them solely rely on it.