Value added tax rise may be scrapped

Finance minister Wouter Bos wants to delay the planned increase in value-added tax (btw) which is due to be introduced in January 2009, cabinet sources tell the Volkskrant newspaper.

The sources say Bos feels the time is not right to increase the tax from 19% to 20% because of its likely effect on economic growth and spending power.
Unions and employers have already urged ministers not to increase btw.
Recent figures from the government’s economic policy unit CPB show that households will have between 0.5% and 1% less to spend next year. But the cabinet promised a 1% rise in disposable income from 2009.
A year’s delay would cost the treasury €2bn, the paper says. It is not clear how the shortfall would be made up.
News that Bos wants to postpone the tax increase is the first stage in discussions on next year’s spending plans, the paper says. Those plans will be presented in September.
Bos declined to comment on the reports. ‘That decision will be taken in August,’ he told the paper.
According to the Financieele Dagblad, the tax delay could lead to a cabinet conflict. Economic affairs minister Maria van der Hoeven is committed to scrapping worker premiums for unemployment benefit, which is due to be financed from the higher btw receipts.
Both unions and employers gave a cautious welcome to reports that the increase may be delayed, the paper said.
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