Higher net wages, fewer tax benefits: Finance minister proposes broad tax reform
On Tuesday, Belgian federal Finance minister Vincent Van Peteghem launched his proposal for a broader fiscal reform which strongly reduces the burden on labour and will ensure that Belgium is no longer the "tax champion" when it comes to labour costs.
Van Peteghem opted for a tax model that is consistent with a dual income tax: activity and replacement income are still subject to a progressive tax, but all capital income will be subject to proportional rates.
"Reality has overtaken our fiscal model. The system is out of balance and people’s confidence has been lost. It is high time to reduce our taxes on labour and to reform our tax system fairly", he said in a press release on Tuesday.
The increase in the tax-free amount, the reform of the tariff structure, the phasing out of the BBSZ (social security contributions) and the extension of the work bonus will make work much more attractive. By doing away with numerous tax breaks, at least one in four codes on tax slips will also disappear.
Van Peteghem stressed that the reform will not be reckless, but with an eye for possible costs and minus values and with respect for acquired rights. "In this way, we ensure a fair and equitable treatment of all property income, and achieve a fair balance in the treatment of labour and property income."
Currently, Belgium is at the back of the pack when it comes to charges on consumption and pollution. For Van Peteghem, this is no longer justifiable in light of the environmental and climate challenges, which is why he wants to opt for a shift of charges on labour towards charges on pollution.
"Reality has overtaken our fiscal model. The system is out of balance and people’s confidence has been lost. It is high time to reduce our taxes on labour and to reform our tax system fairly"
In addition to harmonising the lowest VAT rates, the tax reform also supports families and businesses in adopting a healthy and sustainable lifestyle by opting for a 0% rate for vegetables, fruit, medical care, essential hygiene products such as diapers and other products for intimate hygiene, and public transport, among other things.
A tax-free basis will also be provided for both activity and replacement income, asset income and consumption. This way, Belgium is increasing the tax-free amount within the personal income tax, from €9.270 now to €13.390, the level of the living wage for a single person. A tax-free sum of €6.000 per year is also provided for those who, in addition to a regular job, also have an extra job on the side.
Finance minister Vincent Van Peteghem © BELGA PHOTO HATIM KAGHAT