To put it bluntly, a 20% VAT translates into an additional implicit 20% income tax for all income used to pay expenses. Assuming two people make €1k and €5k a m

To put it bluntly, a 20% VAT translates into an additional implicit 20% income tax for all income used to pay expenses. Assuming two people make €1k and €5k a month (after accounting for all other taxes) and both have fixed expenses of €1k, the former pays 20% taxes on their €1k and the other pays 20% taxes on their first €1k and gets to take the remaining €4k tax free to invest in retirement savings, repay loans or what have you. This translates into an effective 4% tax for the person making €5k compared to the 20% tax for the person barely making ends meet. This is why some people call it a regressive tax. You can literally take that €4k and put it all in a stable investment vehicle VAT-free. You only pay taxes on it if you spend it. The person making €1k a month will have the same 20% higher effective income tax but you will always pay a lower effective tax rate unless you also spend (i.e. purchase goods or services with) every single cent of your income. Cutting VAT would leave you both with more money but while nothing much would change for you it would increase the poorer person's effective disposable income by 25% (€800->€1000). Heck, even if income tax was raised by a flat 4% across the board, you'd be no worse off but their effective disposable income would increase by 20% (€800->€960).