Bank chief warns against raising VAT

Central bank president Nout Wellink has called on the cabinet to scrap plans to raise value added tax (btw) by 1% to 20% if inflation continues to go up at its current rate.

His comments were made in an interview with tv channel RTL Z on Friday afternoon.
Wellink was commenting on figures published by the government statistics office on Thursday which indicate that inflation rose 3.2% last month, reaching its highest level since 2002.

Warning to unions

The central bank chief said that the rate of inflation ‘threatens to shoot up well above the 4% level’ and warned trade unions not to make too high wage demands.
He called on the government, employers’ organisations and unions to negotiate the measures needed to avoid a recession.
The trade unions reacted favourably to Wellink’s comments on Friday. Rienk van Splunder, deputy chairman of the Christian trade union federation CNV, told ANP news service that if btw does not go up, unions will not have to demand high pay rises. He said pay demands could be 0.5% lower as a result.

Political reactions

The Christian Democrats, who are the senior partners in the coalition government, said they do not want to pre-empt next week’s discussions on the budget for 2009.
But CDA MP Frans de Nerée told ANP that his party wants to keep the government’s pledge to scrap unemployment benefit premiums for workers. The cabinet plans to pay for this move by increasing btw.
Coalition partner Labour has already called for the rise in btw to be scrapped. Labour finance minister Wouter Bos is said to be considering postponing the plans for a year.
The opposition right-wing Liberals (VVD) too are against increasing btw. ‘This government’s plans will only make inflation worse,’ VVD MP Frans Weekers is quoted as saying by ANP.

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