I put forward for debate a proposal to change the rate of Value Added Tax.
I propose that a uniform VAT rate be introduced. This rate could be a percentage point lower than the current basic rate, e.g. 17%.
The reduced rate of 8.5% should be abolished.
I propose this for two reasons.
1. A reduction in the standard VAT rate would have a positive impact on the economy as it would mean more value added for all sectors and, in some sectors where the pressure of competition is strong enough, probably even a reduction in prices.
2. The existence of a reduced rate, which is supposed to keep prices of basic necessities low, has lost its purpose, since it mainly produces higher profits for grocers, who in any case set their prices in line with the capabilities of the market and the elasticity of demand, which is extremely low for products that fall into this category.
The latter was partly confirmed recently when the tax rate was reduced for the sale of books on all physical media, window and private household cleaning, home care services, hairdressing, minor repairs to bicycles, shoes and leather goods, clothing and household linen, and the supply of pot plants, seedlings and cut flowers. Contrary to expectations that lower tax means lower prices, some hairdressing salon chains have already replied that they will not reduce prices.