During the consideration of the Tax Plan 2025, the Van Dijk et al. motion was adopted. This motion tasked the cabinet with finding an alternative to the VAT increase on culture, media, and sports. An alternative within VAT was sought for this. Additionally, the premises were that an alternative should not increase complexity, must be legally viable, and must yield sufficient revenue.
Alternative Coverage Sources
Within VAT, there are several ways to achieve alternative coverage. First, other reduced rates can be eliminated. There are currently many different reduced VAT rates. These have been negatively evaluated and contribute to a complex system. Abolishing one or more reduced rates helps simplify the tax system. However, the consequence is that businesses and customers in those specific sectors will be affected.
Another alternative is to increase the existing rates: the reduced rate (currently 9%) and/or the general rate (currently 21%), or a combination thereof. Increasing the reduced rate is a first step toward a single VAT rate. The consequence of increasing the reduced rate is that daily groceries will become more expensive. Increasing the general VAT rate is also a possibility, but the House of Representatives has indicated through a motion that it does not want this.
Standardizing VAT
It is also possible to take a first step towards a single uniform VAT rate. This could be an additional measure to the previously mentioned alternatives. For example, this could involve raising the reduced rate for all products currently covered, except for foodstuffs. The leap to a single uniform VAT rate is too large. Therefore, a new intermediate rate could temporarily apply alongside the general and reduced rates. Creating an extra rate in VAT is currently not technically possible. This can only happen at the earliest from 2027, as the Tax Authority is still working on a new VAT system. Adjusting rates or moving certain products or services from the reduced to the general rate can happen earlier than 2027.
Next Steps
The choice of alternative coverage for the VAT increase on culture, media, and sports is up to parliament. A choice must be made in the short term. This is necessary to create clarity for businesses, citizens, and the Tax Authority, but also to ensure that the legislative process can proceed smoothly. The cabinet aims to amend the law by July 1, 2025. The alternative will then take effect on January 1, 2026. This allows for another six months of preparation time. If no alternative is chosen, the VAT increase on culture, media, and sports will take effect on January 1, 2026, as it is currently stated in the law.