Government mulls 0.4% VAT rise to 21.4% following failure of reduced rate reform
The Dutch government is considering raising the high VAT rate from 21% to 21.4% to compensate for the cancelled VAT hike on books, culture, and media. In November, a majority in the House of Representatives forced the reduced VAT increase off the table.
The government is currently working on a proposal that is to go to the House of Representatives next week, so that a decision can be made in the spring. In addition to the idea of a standard rate rise is a propose to consolidate the existing 21% and reduced 9% rates into a single rate of approximately 18%. However, this has even less change of passing given so many essentials (e.g. foodstuffs) would face a sharp rise in tax. A third alternative is a 1% rise in the 9% reduced rate to 10%.
This would make items like clothing, streaming services, and cars more expensive. Sources confirm that this option is seen as the most viable, but it faces opposition from a parliamentary majority, plus the VVD and PVV parties which are part of the new coalition government.
Given the lack of a majority for the government in Parliament,
A Dutch VAT rate rise last happened in 2012 when it increased from 19% to 21%. Read more in our Dutch VAT guide
State Secretary Tjebbe van Oostenbruggen has discussed various alternatives, including a single uniform VAT rate of around 17–18%, replacing both the 21% and 9% rates. However, this would make groceries more expensive, making it unpopular. Another idea—to raise the low VAT rate from 9% to 10%—also lacks support.
The original VAT increase on culture, media, and books was scrapped after opposition parties threatened to block the entire Tax Plan. Finance Minister Eelco Heinen now seeks alternative VAT measures to cover the €1.2 billion shortfall.