Post by Sapphire Capital on Sept 25, 2008 4:45:50 GMT 4
Netherlands abandons VAT increase for now
Source: Joanna Faith ITR
The Dutch government has backtracked on a decision to increase the standard rate of VAT because of the effect it might have had on the economy.
In last year's budget the government said the rate would increase from 19% to 20% as of January 1 2009. But in this year's budget on September 16, it announced the change in rate will not take place.
This is the second time the government has altered plans for VAT. Initially the increase would have become effective on January 1 2008. It was then postponed by a year.
"The government was under a lot of pressure by a number of parties such as the chair of the central bank and the labour trade unions," said Folkert Idsinga, a partner at Baker & McKenzie in Amsterdam.
"They said it would have a negative impact on the current economy."
It is not clear if the plans have been delayed or if they are have been abandoned altogether.
"If the economy improves over the next two or three or years, maybe the topic will be raised again," Idsinga said. But it may also depend on the type of government the Netherlands has at the time.
"At the moment the government is relatively left-wing and it believes consumption should be taxed. A right-wing government may have different ideas," said Idsinga.
A one percentage point rise in VAT would result in €3 billion ($4.4 billion) of extra government income.
Source: Joanna Faith ITR
The Dutch government has backtracked on a decision to increase the standard rate of VAT because of the effect it might have had on the economy.
In last year's budget the government said the rate would increase from 19% to 20% as of January 1 2009. But in this year's budget on September 16, it announced the change in rate will not take place.
This is the second time the government has altered plans for VAT. Initially the increase would have become effective on January 1 2008. It was then postponed by a year.
"The government was under a lot of pressure by a number of parties such as the chair of the central bank and the labour trade unions," said Folkert Idsinga, a partner at Baker & McKenzie in Amsterdam.
"They said it would have a negative impact on the current economy."
It is not clear if the plans have been delayed or if they are have been abandoned altogether.
"If the economy improves over the next two or three or years, maybe the topic will be raised again," Idsinga said. But it may also depend on the type of government the Netherlands has at the time.
"At the moment the government is relatively left-wing and it believes consumption should be taxed. A right-wing government may have different ideas," said Idsinga.
A one percentage point rise in VAT would result in €3 billion ($4.4 billion) of extra government income.