The decision to increase value-added tax (btw) from 19% to 21% will cost Dutch households some €15 a month, rising to €27.50 a month in 2013, according to economists with financial services group ING.
The tax increase, which will come into effect in October, is part of a package of austerity measures agreed by the minority coalition government and three other parties last week. Food is subject to a 6% btw rate in the Netherlands, and that remains unchanged.
Spending power will be further depressed by the pay freeze for most public sector workers.
The government’s macro-economic think-tank says the overall effect of the tax increase and pay freeze will be to reduce spending power by 3% next year. Inflation is likely to be around 2%.
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