Sources: Cabinet to cut taxes on natural gas, fuel to provide inflation relief

The Cabinet intends to introduce temporary cuts to the excise duty on fuel, and the value added tax applied to energy, sources close to the government confirmed after a report by AD. The tax cuts are meant to provide relief from the decline in purchase power, driven by a high rate of inflation.

Natural gas and electricity are now subject to the highest VAT rate of 21 percent, but would temporarily fall to the low rate of 9 percent. The discount on excise duties on petrol and diesel is still under discussion. The measures would come into effect on 1 July for an initial period of six months.

The government has already set aside 200 euro payments for the poorest households in the country to help them continue to pay their energy bills. Sources said that amount will be increased by hundreds of euros. The government also wants to help households save on overall energy consumption by making subsidies available more quickly for home insulation and other initiatives.

Earlier this week, the Central Planning Bureau (CPB) released new estimates for purchasing power. In the worst-case scenario, people will face a 3.4 percent loss this year in spending power, mainly because the prices of energy and fuel have skyrocketed as a result of the war in Ukraine. When taking office, the Cabinet had promised that purchasing power would remain roughly stable.

Prime Minister Mark Rutte warned earlier this week that the Cabinet promise is no longer tenable. The war in Ukraine and the ensuing sanctions against Russia are creating a new economic reality. He did promise that the Cabinet would do everything in its power to mitigate the consequences to people’s wallets, especially for people who are not already financially well off.

It is not yet clear how much the package of measures will cost, because the precise details of some measures have yet to be discussed by the Council of Ministers. But Social Affairs Minister Karien van Gennip previously hinted that it could be comparable to the 3 billion euros in relief that was already earmarked last year to compensate for the increase in energy bills.