Consumer union hits out at VAT rise

Luxembourg Consumer Union the ULC has hit out against the VAT reform, saying the government is sending out the wrong signal to consumers.

At a press conference on Monday, ULC President Nico Hoffmann criticised plans to increase VAT in Luxembourg to 17 percent starting January 1, 2015, saying it would reduce purchasing power.

An increase in tax on the sale of goods would be counter-productive and anti-social, the president said, adding that consumers will pick up the slack “while those who are to blame for the crisis get off scot free”.

The ULC fears that weakening purchasing power will lead to a decline in local demand, damaging the trade and crafts industries. It says that consumers will only shop where products are cheaper- in the Greater Region.

Consumers at a disadvantage

The union's solution is to embed the VAT hike in a global tax reform or accompany it with other social reforms. The ULC cites the huge VAT hike on alcohol from 3 to 17 percent, saying this particular reform will not only hit consumers but also the food and beverage industry.

Plans to increase VAT on second homes will also hit put consumers at a disadvantage, the union said, “because these additional costs will be passed on to the tenant,” Mr Hoffmann said.

The ULC wants the government to rethink both VAT increases and, at best, to revise the rate down, or waive it altogether. The union said it was pleased that the government has made housing a priority, but said that it lacked new ideas in meeting the demand for flats in Luxembourg.

With regard to the indexation of wages in line with inflation, Mr Hoffmann said that it would send out the wrong signal to return to the original index mechanism. “When inflation picks up again, will new index modulations be negotiated with social partners? How stupid do you think people are?” he questioned.

Mr Hoffmann spoke against placing a ceiling on indexation and against further modulations. “For many households, the index is the only means to compensate for their loss of purchasing power,” he said.

Translated from an article by Michèle Gantenbein

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