The government’s plan to cut work-related taxes and premiums by €5bn is likely to go ahead after the Liberal democrats D66 reached a deal with the finance ministry, sources told the NRC on Tuesday.

D66, together with the Christian Democrats, will give the coalition majority support in the upper house of parliament. The two ruling parties only control 21 of the 75 seats.

D66 did not support the reforms in the lower house, saying they did not go far enough to create jobs and make the tax system more environment-friendly. The sources told the NRC that tax minister Eric Wiebes has now reached a compromise on this. He is due to brief parliament later on Tuesday.

In total, the government plans to cut taxes and premiums by €5bn. This will be done by making changes to the tax free allowances and tax bands so that, for example, the top rate of 52% kicks in on income over €66,421.

The second stage of the reforms involves increasing the 6% value-added tax (btw) rate to the higher rate of 21% on some products and services. Small firms and retailers have already condemned this proposal.

The third stage, which still has to be worked out in detail, will involve giving local authorities more tax raising powers in return for further cuts in national taxes.