Netherlands told by IMF to implement single VAT rate

Fri 26th Dec 2014

The Dutch VAT rates have come in for criticism from the International Monetary Fund (IMF). It has recommended that the Netherlands merge the current standard VAT rate of 21% with the reduce VAT rate of 6%.

The suggestion is aimed at reducing the administrative burden on maintaining two rates, but also to eliminating the distortions caused with some goods being at a lower rate. Any increase in the proportion of tax levied on the less well off could be balanced with targeted benefit increases.

Any such amalgamation could help fund a competitive cut to the Dutch labour and corporate income tax rates. This would help ensure that the Netherlands was able to maintain and attract global investment from job-creating industries. The IMF also suggested an income tax cut as the Netherlands has one of the highest marginal rates in the world.

The Netherlands raised its VAT rate from 19% to 21% in 2012 at the height of the Euro currency crisis.