A question about VAT

Reducing taxes (of any sort) lowers the taxing government's income.  This means the government has less money to spend on normal activities, such as paying interest on debt, public works, education, and defense.  Unless there is a corresponding decrease in government spending levels after a tax reduction, the government will actually increase its deficit spending.  Broadly speaking, this will result in greater inflation (which has a drag effect on the economy).

On the positive side, lower taxes, as indicated in the previous answer, also generally mean lower prices.  This will generally stimulate an economy by creating more demand for goods, and this may lead to lower unemployment.

 Broadly speaking, a tax reduction without a corresponding spending reduction does not have a positive economic impact.  See http://woodrow.mpls.frb.fed.us/pubs/ar/ar1979.cfm for more details.

Well, Mark50 has mentioned that lowering taxes lowers goverment's revenue from tax. Since it's exactly the opposite of what I said in the first part of my answer, I'll try to explain.

For a detailed explanation, read about the Laffer Curve. In short, the laffer curve describes a well known situation, in which when people believe a tax is too high, they tend to evade from paying their taxes. When governments lower a tax, you'll find that more people are willing to pay it, so actually the state revenue increases, since more people are paying. Of course that is to a certain level, from which lowering taxes decreases state revenue although more people are paying, since the amount they pay is very small, and then, as said by Mark50, the government has to reduce its expenditure.