Coalition parties split on VAT rise

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A discussion between the Christian Democrats and the Labour Party on VAT increase had party members come to blows with one another.

3 July 2008

THE HAGUE - There was a serious clash in the lower house of parliament on Wednesday between the two main coalition parties, the Christian Democrats (CDA) and the Labour Party (PvdA).

The house was debating cabinet plans to increase the level of Value Added Tax (VAT) on goods and services from 19 to 20 percent in 2009 and at the same time scrap unemployment benefit (WW) contributions by employees.

The Labour Party wants to postpone this trade-off since it is worried that a VAT increase will fuel further inflation. The Christian Democrats are convinced a postponement would lead to the plan being shelved indefinitely. They point out that the scrapping of the WW contributions will improve workers' purchasing power.

The debate became somewhat heated, with Labour accusing the Christian Democrats of "writing uncovered cheques" when a CDA member suggested WW contributions could be scrapped without the VAT rise.

One Christian Democrat MP accused Labour of "courting disaster" by trying to scupper the plan. Labour leader and Finance Minister Wouter Bos pointed out that a rise in VAT was not the only way to cover the EUR 2 billion cost of scrapping the WW contributions. He suggested higher eco-taxes as an alternative.

The cabinet has until August to sort out its budget plans for next year. In the meantime, the Labour Party will be consulting the trade unions and the employers' organisations about the desirability of postponing the VAT-WW deal.

[Radio Netherlands / Expatica]

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