VAT to rise to 20% in 2008 say media

The basic VAT tax rate is set to rise from 19% to 20% in the September budget, the Volkskrant and Telegraaf report on Friday. The increase is the most important element of the 2008 budget which has been leaked so far.

As well as the increase in VAT, the Volkskrant claims ministers have agreed on a sharp reduction in unemployment benefit (WW) premiums.
In total, finance minister Wouter Bos will present plans to cut spending by a total €1bn plus tax and premium cuts of €700m, the paper says.
Next year’s budget is based on ‘a solid financial policy’ and shows ‘fine spending power developments’, Bos told reporters late on Thursday afternoon.
He was speaking after ministers reached agreement on the 2008 spending plans, which will presented to parliament on September 18.
Bos declined to go into details but sources say the budget includes measures to maintain the spending power of people on the lowest incomes. But other income groups will have between 0.25% and 0.5% less disposable cash next year.
Taxes on petrol, tobacco and alcohol are set to increase to help reduce the budget deficit.
A number of ministries will have smaller budgets but the defence department will be spared because of the possible extension of its mission in Afghanistan, news agency ANP reported.
The tax break for non-working women is also set to be phased out more quickly than earlier planned, ANP said.
Bos also said that the cabinet is on the verge of reaching agreement with the housing corporations on plans to invest billions of euros in renovating run-down areas.
Housing groups are furious at his plan to levy an extra tax on their income and use the money generated to fund renovation projects. They want to control spending on urban renewal themselves.
The Volkskrant says the new deal involves housing corporations spending €3bn on urban renewal projects and contributing an extra €1bn to a special central housing fund.

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