Value Added

The Dutch government is thinking of increasing the VAT from its current 19% to 20% at the end of this year (source). That may seem like a lot, but for instance in Denmark I believe it stands at 25% and Denmark is a pretty nice country.

I’m curious to the rationale of such an increase of 1%. Why increase it at all? In the current political climate it will only increase perception that Jan Modaal1 is being screwed over by government. And why then not increase it directly to 25% or 50%, if it’s such a good thing?

In other news a radio commercial claiming that ‘taxation is theft’ (source) was banned this week.

  1. Dutch for the Average Joe.

2 thoughts on “Value Added”

  1. Weird. Rich people like VAT – they spend far less percent of their total income on VAT-carrying goods. It’s like an inverse tax disc system: The more you earn per year, the LESS percent of that income you have to hand over to the government. Jan Modaal is indeed getting specifically screwed with high VAT.

    In fact, the existence of both VAT and progressive income tax (where the % of income you have to hand over increases as you earn more) is one of the reasons I use to convince people that we should toss out all that complication and just have a flat 40% tax on everything you earn, no VAT whatsoever.

    VAT is too complicated anyway; How many millions of euros are wasted every year in determining exactly which bits are value add?

  2. How do you calculate that? Luxury goods also carry VAT. Is it because rich people in general are able to save a larger part of their income (and become richer)?

    You don’t need to convince me. Give me a tax law book and a black marker and I’m sure I can come up with a ton of usability improvements.

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