Key ministers continue their search for savings and fresh cash as they thrash out next year’s federal budget. Federal PM Bart De Wever (Flemish nationalist) has now also put an increase in sales tax VAT (Value Added Tax) on the negotiating table during the ongoing budget talks.
The prime minister wants to tinker with VAT to reduce the budget deficit. It is one of the measures he has put to cabinet colleagues in recent days. Budget talks resume today.
Mr De Wever is returning to an idea that was already on the table for a while during last year's government negotiations. His famous super memorandum also mentioned ‘harmonisation of VAT rates’. This would involve replacing the 6% and 12% VAT rates with a single rate of 9% sales tax.
Products currently subject to a 6 per cent tax – including vegetables, meat and dairy products – would then become more expensive. A visit to a restaurant, currently subject to a 12 per cent tax, would become cheaper.
Immediate opposition from employers and trade unions
On average, the amount of VAT ordinary mortals pay would increase. The additional tax revenue would help to reduce the budget deficit.
Trade unions and employers, united in the Central Business Council (CRB), immediately opposed the proposal. ‘A shopping trolley full of food will cost €109 instead of €106 after the reform,’ says the CRB. It fears that low-income families in particular will be affected and that thousands of jobs are at risk of disappearing.
The likelihood of the VAT reform being implemented seems rather slender. Both Francophone liberal MR and Flemish socialist Vooruit and Christian democrat CD&V opposed the idea last year and there is still little enthusiasm for it now.
Index jump and growth norm
Yesterday, Mr De Wever also saw his proposal for an index jump immediately rejected by several coalition partners, but, interestingly, not by the Francophone centrists of Les Engagés Thursday. This would mean that the automatic wage indexation of 2% in step with inflation would be skipped once, meaning that wages would not rise despite an increase in the cost of living.
Vooruit leader Conner Rousseau immediately stated that ‘there are other ways to improve the situation of the budget’. CD&V supremo Sammy Mahdi even called the proposal ‘out of the question’.
Mr De Wever is also looking at reducing the growth norm in healthcare. This percentage determines how much the budget can increase above inflation.
The coalition agreement brokered by the 5 federal government parties last year states that this would rise to 3 per cent by 2029, but Mr De Wever now wants to adjust this to 2 per cent. Socialist Vooruit in particular – with health and social affairs minister Frank Vandenbroucke – and Francophone centrist Les Engagés are not in favour of this either.