The low VAT rate of nine per cent on various products is not efficient in achieving the objectives. This is the conclusion of a study conducted at the request of the government. The lower tax is also expensive, say the researchers, who argue that there may be more effective alternatives.
This mainly concerns specific product groups which, according to the researchers, should better fit into different tariffs. An even more ‘radical’ choice would be to completely abolish the nine per cent VAT. This could be done “by converging the reduced rate and the general one”.
The lower VAT currently applies to food and some types of services. The Cabinet now chooses to award the nine per cent rate to groups in cases of unfair competition or to reduce the tax burden. Furthermore, the tariff is used to incentivize citizens to purchase certain services and products. But the low rate hardly contributes to most of these goals, the researchers conclude.
It fails the tax test
The richest half of households benefit in particular. They benefit “twice the reduced VAT” of the poorest 50 per cent, the researchers believe. “The richer a family is, the more (!) they benefit from the reduced VAT.” Furthermore, the scheme does not meet the tax test.
According to the government’s own rules, the scheme should at least be adequate. The government announced last year that tax schemes that score poorly should be streamlined or abolished.
Targeted measures
The researchers advise the government to look critically at whether low VAT rate targets are still relevant. Choices along these lines were often made decades ago “and are no longer current”. The government should also consider whether there are more targeted measures that work better, such as income tax cuts or subsidies. Responsible State Secretary Marnix van Rij (Taxation) will examine the report shortly. You will submit a response on behalf of the cabinet before the Prinsjesdag.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
