VAT, energy tax increases push Netherlands inflation; wages lagging behind

Consumer prices were on average 2.6 percent higher in 2019 than in 2018, the biggest price increase since 2002. The increase was driven by increases in the low VAT rate and energy tax in January last year, according to figures Statistics Netherlands released on Thursday. For the first time in five years, collective bargaining wages increased by less than inflation - wages were 2.5 percent higher last year than the year before.

The 2.6 percent increase in consumer prices was larger than the 1.7 percent increase in 2018. According to the stats office, this largely had to do with the increase in products that fall under the low VAT rate, especially food and beverages. Food and non-alcoholic beverages were on average 4 percent more expensive than in 2018, the strongest increase in a decade. Food products make up over 10 percent of all consumer spending.

A total of 22.5 percent of consumer spending fell under the low VAT rate last year. The prices of products and services under the low VAT rate increased on average by 4.1 percent last year. For comparison, products and services covered by the high VAT rate were 2.3 percent more expensive.

Like in 2018, the price increase or energy was among the highest of the year. Last year electricity was on average 15.7 percent more expensive than the year before. The price for gas increased by an average of 10.6 percent. This was due to both higher delivery rates and higher taxes no gas and electricity.