I read this background article the other day: The Laffer curve depicts the amount of government revenue as a function of the rate of taxation. It shows that for a tax rate above a certain critical rate, government revenue starts decreasing as the tax rate rises, as a consequence of a decline in labour supply. This theory supports that, if the tax rate is above that critical point, a decrease in the tax rate should imply a rise in labour supply that in turn would lead to an increase in government revenue.  I am facing a new situation today: The country of Hinland reduced taxation hoping it would mean more money for government spending. On the other hand, Silvania, a southern country increased taxation hoping they would increase collection amounts. The problem was that Silvanian people increased taxation above the critical rate.  Using the knowledge I acquired from the background article, how should I answer correctly the following question regarding my new situation: Which country experienced an increase in government revenue?

Hinland