Sales tax hike on most purchases in secret gov't plan, sources say

Sources close to the secret cabinet negotiations on a package of tax reforms say that the government is planning to increase sales tax on many goods and services to generate an extra five billion euros in revenues, according to the NRC. The cabinet wants to raise the tax to balance out an effective cut in income tax for many living in the Netherlands. The tax plan involves raising the six percent "low tariff" value-added tax rate to the current 21 percent "high tariff" on everything except food purchases. Currently, the six-percent rate applies to many services and goods like clothes, books and non-alcoholic beverages. The government is also planning to reduce payments to municipalities by five billion. Instead, municipalities may get more power to collect local taxes. Simultaneously, expanding the lowest income tax brackets would work as a tax cut for the middle class. According to calculations by the previous FInance Secretary Frans Weekers, the treasury missed out on over nine billion euros because of a lower VAT in 2011. Weekers, a VVD politician, held office from 2010-2014 serving in both of Prime Minister Mark Rutte's cabinets. A recent study by the Central Planning Bureau claims that lower VAT is not fulfilling its purpose of decreasing tax burden on lower income groups. The study suggests that it is mainly people with high incomes who benefit from it. The current State Secretary of Finance, Eric Wiebes, is going to present the plan to the leaders of the coalition and opposition parties on Wednesday night. The Socialist Party has declined the invitation to the meeting as a protest.