Among the attributes of the Dutch people are hard work, punctuality, and a friendly, free spirit. But when the new Netherlands coalition government was formed earlier in the year, one of its first steps was a massive tax increase on an already overburdened population. The increase of the Value Added Tax (VAT) from an already robust 9% to 21%, literally overnight, has jolted business ledgers and key sectors, among them tourism and the famous flower industry.
Naturally, as in most European countries, never mind American states, the government is addicted to higher spending, expanding “services” and keeping a bloated bureaucracy afloat. In the case of the Netherlands creaking new minority three-party coalition government, lacking a parliamentary majority, has proposed a “Let’s Get to Work; Building a better Netherlands” programme with some novel fiscal policies for this largely prosperous country of 18 million people.
The 21% VAT hits the hospitality industry, namely hotels, which are already feeling the pinch as summer approaches and tourists from neighbouring countries are shying away from bookings. Equally, according to industry sources, domestic Dutch tourism has seen a dip in reservations too.
Certain hotels are feeling the fiscal pain, but many managers concede they are “absorbing some of the new tax costs” to avoid dampening foreign bookings. Some hotel groups have noticed a falloff in bookings. But even in the Hague, the staid seat of government, higher taxes have equally had an impact on tourism as restaurant and drink prices have risen.
VAT targets goods and services, a consumption tax levied on the value added at each stage of a product’s production and distribution. All European Union countries have high VATs; with Belgium at 21%, Germany at 19% and Sweden at 25%. Only non-EU Switzerland has a lower VAT at 8%.
Fortunately, the government doesn’t want to increase gasoline taxes; the current price is just over $10.50 (340 baht) per gallon (3.785 litres). Euro News reports that the Netherlands has the highest petrol and diesel prices in Europe. Given the size of the Dutch trucking industry, diesel prices will be passed on to consumers. But despite higher fuel costs for personal vehicle travel and transportation, train fares will increase by just over 6%.
Importantly, the Netherlands’ major horticulture industry, the marketing of Holland’s flowers, is also feeling the VAT tax pinch. Royal Flora Holland, the huge growers cooperative and distribution centre, deemed the new tax initiative “a very bad plan by the new government.”
Wageningen University & Research points to a fall in sales of almost $459 million and the loss of nearly 2,400 full-time jobs in the horticulture sector, adds the Holland Times newspaper.
The new government, led by Prime Minister Robert Jetten of the progressive D66 centre-left party and two smaller libertarian parties in coalition, including the VVD People’s Party for Freedom and Democracy, face pushback and political “horse-trading” from many of the 15 parties in parliament.
Just across the North Sea from the Netherlands, I can’t help but comment on the seismic political events in the United Kingdom. Local and regional council elections throughout the UK delivered a greater-than-expected shock to both the sitting Labour government and the opposition Conservatives, who suffered stunning political losses to the populist Reform Party and, to a degree, the hard-Left Greens. These elections were not based on traditional ideology but on how the government performs or doesn’t on the local council level.
For example, Labour lost 1,496 seats nationally while holding just over 1,000. The Conservatives lost 563 seats but held 801. But the upstart Reform of Nigel Farage won a stunning 1,453 seats while the Greens gained 441. Not surprisingly, Reform showed best in areas which supported Brexit a decade ago. And Labour lost badly to Reform in regions that were traditionally trade-union and post-industrial but fed up with Labour’s political promises. But as the Spectator conceded, “Brexit Britain” voters have also deserted the Conservatives to Reform.
BBC pundits pointed to a “political reset” as Prime Minister Kier Starmer’s Labour Party was jolted by results which pointed to a “new political universe,” rather than the more traditional two-party system. Mr Starmer’s standing has been rocked, and he may not hold on. Rebellion within Labour’s ranks threatens to topple the PM, who came to power just under two years ago in a convincing landslide. But the tides have changed.