The VAT is the most important source of income for the government

The government is increasing its focus on the VAT and that is a wise thing to do, says Professor Peter Kavelaars. The VAT is quite an efficient levy. It is not as economically disruptive as the income tax for example. As a result, we see that the share of the VAT in the tax revenues is increasing. Moreover, we see a shift to the VAT and a decreasing tax burden on labour. This is not only true for the Netherlands, but also the countries around the Netherlands. 

There is always much objection to increases in the VAT, especially to increases in the lower rate. However, the disruptive effect of this is small, says Professor Peter Kavelaars. Taxes on labour limit economic growth more, so increasing the VAT rate and reducing the income tax rate has a net positive economic effect. I think that the low rate will increase more in the coming years, says Professor Peter Kavelaars. In his opinion, it would be good if the high and low rate would grow towards each other and that we, in a few years, proceed with only one rate. Then, an other disadvantage will be eliminated: distinguishing between goods that fall under the low rate and goods that fall under high rate. This distinction is quite arbitrary on some points and forms an administrative burden for entrepreneurs. It would be nice if we could put this in motion in the coming 10 years.