Collection of Global Roundup of Rate Changes and Developments on VATupdate.com – February 2025

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Highlights

Executive Summary:

This document summarises VAT (Value Added Tax), GST (Goods and Services Tax) and Sales Tax developments around the world in early 2025. Key trends include rate changes (increases and decreases), expansions of VAT to new sectors (particularly digital services and previously exempt goods), and government efforts to address compliance issues and fraud. Many countries are adjusting VAT rates in response to economic pressures, IMF recommendations, or to align with EU directives. A significant number of changes concern food items, with varying approaches to VAT application. Several nations are grappling with the impact of VAT/GST on specific industries, including tourism, agriculture, and energy.

Key Themes and Developments:

Rate Adjustments (Increases and Decreases):
- Increases: Numerous countries are considering or implementing VAT increases, often driven by budgetary shortfalls or recommendations from international bodies like the IMF and World Bank. Examples include:
- Kazakhstan: Considering raising the standard VAT rate, potentially to 16% or even 20%. President Tokayev is calling for differentiated rates. “Tokayev Calls for Differentiated VAT Rate in Kazakhstan”. The World Bank has recommended Kazakhstan to raise the VAT rate.
- Dominica: Considering a VAT hike to fund income tax cuts.
- South Africa: Debating a VAT hike to address revenue shortfalls, facing opposition. “VAT deadlock forces budget speech delay”.
- Slovakia: Slovakia contemplates reverting VAT rate to 20% due to economic strain.
- Decreases: Other countries are reducing VAT rates, often on specific goods or services, to stimulate consumption, combat inflation, or support particular sectors. Examples:
- Angola: Approved 2025 budget, cuts VAT for manufacturers.
- Bahamas: Cutting VAT on unprepared food to 5%. “Bahamas Cuts VAT on Unprepared Food to 5%”.
- Bangladesh: NBR cut VAT on biscuits in half after industry concerns.
- Nova Scotia (Canada): Cutting HST (Harmonized Sales Tax) rate to 14%. “Nova Scotia Cuts HST Rate to 14% in 2025 Budget”.
- Croatia: Extends reduced VAT rate on energy supplies. “Croatia Extends Reduced VAT Rate on Energy Supplies”.
- Indonesia: Cuts VAT on economy flights for Eid travel.
- Poland: Reintroduced zero VAT on food products. “Poland Reintroduces Zero VAT on Food Products”.
- Vietnam: Government extends VAT cut till June 30, 2025.
Sector-Specific VAT Changes:
- Food: A major area of focus.
- Estonia: Proposes 9% VAT on basic food groups, but facing opposition due to concerns about state finances. “Estonia Proposes 9% VAT on Basic Food Groups”.
- Netherlands: The German election has tax plans for food and drinks
- Energy:Croatia: Extending reduced VAT rate on energy supplies.
- France: Aligning VAT rates on heating with EU laws. “France Aligns VAT Rates on Heating with EU Laws”.
- Digital Services & E-commerce:Indonesia: “Indonesia’s Digital VAT: A Progressive Solution for Revenue and Equity”.
- Vietnam: Consultation launched on tax rules for e-commerce and digital platforms.
- Healthcare & Medical:Turkey: Expands 10% VAT rate on medical goods.
- Romania: Deputies from the Health Committee approve VAT reduction to 9% for diapers
- Canada: CRA Exempts Artificial Teeth in Dental Services, Ignoring Davis Dentistry Ruling.
- Culture, Media, and Sport:Netherlands: Debating VAT rates on culture, media and sports. Coalition parties backing down from higher VAT. “Coalition Parties Back Down: No Higher VAT on Culture and Sports”.
- Tourism:Bulgaria: Discussion on Differentiated VAT Rates in Kyustendil: Challenges and Opportunities for Tourism Sector.
- Agriculture:Greece: Clarifying circular on 13% VAT reduction for agricultural goods.
- Northern Bangladesh: Growers Protest 15% On Tomato and Mango Pulp, Demand Rollback
- Housing/Construction:Belgium: Constitutional Court Approves Abolition of Reduced VAT on Rebuilt Homes.
- Cyprus: Proposes Ending Reduced VAT for Foreign Homebuyers.
- Italy: First Home Tax Break: A Year of Misalignment Between VAT and Registry.
EU Compliance & Directives:
- Several EU member states are facing scrutiny for non-compliance with EU VAT directives.
- Belgium, Bulgaria, Greece, Lithuania, Portugal, Romania: Seven EU States Instructed To Implement New VAT Rates Directive.
- Greece: EC Takes Actions Against Greece Over VAT Non-Compliance.
- EU Commission Issues Warning to Seven States for Failing to Implement New VAT Rates Directive
Simplification & Reform Efforts:
- Some countries are undertaking broader reforms to simplify their VAT systems and improve compliance.
- Ghana: To overhaul VAT system, targeting exemptions and compliance. “Ghana to Overhaul VAT System, Targeting Exemptions and Compliance”.
- Old Dhaka Business Leaders Demand Tax, VAT Simplification
VAT and Economic/Political Context:
- VAT changes are often intertwined with broader economic challenges, political considerations, and social goals.
- Bangladesh: VAT Hike Reflects Govt’s Failure in Negotiation with IMF; VAT Hike to Cover Uprising Victims’ Medical Costs.
- Mozambique: Exempts Sugar, Oils, Soaps from VAT to Ease Cost of Living. Chapo’s VAT Gamble: Will Tax Cuts Ease Mozambique’s Cost of Living?
- South Africa: VAT up, doc? A note on South African VAT; Ramaphosa Defends VAT Hike Amid Criticism; EFF Demands Wealth Tax, Rejects VAT Hike in Budget 2025.
Fraud and Compliance:
- Belgium: VAT Measures Included in the Federal Government Agreement; Measures to Impact Climate, Consumption, and Combat Fraud in Indirect Taxes: Agreed VAT and Excise Duty Changes
- Netherlands: VAT Fraud: Court Rejects Zero Rate, Emphasizes Proof Burden
Specific Product Focus:
- Tobacco/Cigarettes: India Smokey Affair: GST on cigarettes, tobacco products may be raised; Cambodia Implements 10% VAT on Cigarettes to Combat Health Risks.
- Fuel/Energy: South Korea Extends Butane Consumption Tax Reduction; New York Sales Tax Rate Changes for Fuel, Fuel Cell Systems, and Clothing in 2025; Kazakhstan Additional Excise Rates on Gasoline and Diesel Fuel are Established: Draft

Illustrative Quotes:

(Bangladesh – VAT Hike Impact): “VAT Hike: IMF Deal Failure Burdens Businesses and Consumers”.
(Netherlands – VAT Increase Concern): “Entrepreneurs fear potential VAT increase in the Netherlands, impacting recovering sectors like hospitality and retail.”
(South Africa – Political Opposition): “EFF Demands Wealth Tax, Rejects VAT Hike in Budget 2025”.
(Ghana – VAT Reform): “Ghana to Overhaul VAT System, Targeting Exemptions and Compliance”.

Implications:

The diverse range of VAT changes highlights the complexity of indirect taxation and the need for businesses operating internationally to stay informed of the latest developments. The focus on specific sectors and goods indicates a targeted approach to using VAT as a tool for economic and social policy. Businesses need to monitor these changes closely to ensure compliance and to adapt their pricing and business strategies accordingly.

Angola