The UK has a similar rule and they needed a lawsuit over whether a Jaffa cake was a cake or a biscuit.
Consumption taxes force you to choose between simplicity and progressiveness. Now, That's a great feature of a tax system if you live to exploit the loopholes.
Yes. This has happened a few times. Cakes and biscuits are seen as staple food items and thus don't need to include VAT in the pricing, unless they are luxury items. So there's a lot of discussion about whether something is a luxury biscuit or normal cake.
https://www.theguardian.com/business/2019/jan/16/crumbs-judg...
I guess it comes down to cost versus benefit?
The nice thing about consumption taxes is you capture even black market money. And the wealthy will pay the overwhelming majority of the tax.
How exactly? Since when do prostitutes and drug dealers pay sales tax?
The tax refund part isn't really needed.