Unemployment benefits to be taxed more heavily starting next year
Unemployment benefits in Belgium will be subject to heavier taxation starting next year, as part of the federal government’s summer agreement. The reform, confirmed by the cabinet of finance minister Jan Jambon (N-VA), will see the gradual abolition of existing tax reductions for the unemployed, with full implementation expected by 2029.
Phasing out tax reductions
Currently, unemployed people benefit from a two-part tax reduction: a basic reduction worth up to 2,200 euros and a supplementary reduction worth around 450 euros. According to the summer agreement, the supplementary reduction will be discarded in 2026, and the basic reduction will be phased out entirely by 2029. The government’s stated aim is to increase the gap between income from work and income from benefits, to further incentivise employment.
The reform elaborates on plans already outlined in the coalition agreement. In a controversial lecture earlier this year, the chief of staff to Jambon noted that “unemployment benefits are suddenly going to be reduced by 200 euros per month,” a comment that sparked criticism from unions and anti-poverty organisations.
Concerns Over Impact on Low-Income Households
Trade unions and social organisations warn that the consequences will be severe, especially for single people and families with children. According to the Christian trade union ACV, some unemployment benefits could fall below the minimum income threshold by 2029. Single parents could be among the hardest hit, with their benefits dropping below the threshold in their second year of unemployment.
The Belgian Network for Combating Poverty has also raised concerns. “We know they’re a particularly vulnerable group, so it’s a shame they’re hit the hardest,” said coordinator Caroline Van der Hoeven. She added, “We know that some benefits are already below the poverty line. We find it unacceptable to impose additional taxes on incomes that are already below that level. This pushes people deeper into poverty, while it’s easier for people to find work if they can make ends meet.”
The impact on temporary unemployment is another concern. Bert Engelaar of the socialist trade union ABVV said, “We see no exception to this rule for people receiving temporary unemployment benefits. They will also be taxed more heavily, even though they can’t do anything about being placed on economic unemployment by their employer.”
Although the government points to the rising tax-free allowance, which the unemployed will also benefit from, critics say this does not fully offset the loss of the reductions.
Government response and transitional measures
The Jambon cabinet confirmed that the phase-out of tax reductions will begin in 2025 and continue until 2029. However, a transitional period will ensure benefits do not fall below the minimum income threshold before then. “A solution is being sought” for what happens after 2029, the cabinet added.
Prime minister Bart De Wever (N-VA) also responded to the criticism, saying: “I find it strange that the union is discovering something that already exists. There are already living wages, if you have dependent children, that are higher than some benefits.” He said that a transitional tax reduction would remain in place until 2029: “I can reassure them: we anticipated that effect. There will be a tax reduction, meaning that the unemployment benefit will always exceed the living wage.”
Pensioners also affected
The reform will also affect pensioners, who currently benefit from a similar tax reduction. While this will not be abolished entirely, it will be phased out depending on the size of the pension. For pensions above 70,570 euros, the tax reduction will be removed entirely. Those receiving smaller pensions will retain part of the reduction.
“This is in addition to many other measures,” said Koen Peeters of the senior citizens’ association Okra. “People are portraying pensioners as nothing more than a cost. That’s a perception we’d like to change.”
© PHOTO ANNABELLE HAMIL / HANS LUCAS VIA AFP
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