The wealthiest 1% of earners in Belgium contribute less relatively to taxes and social security, according to new data from the National Bank of Belgium (NBB), revealing larger income inequality than anticipated.
On Monday, the National Bank released new figures regarding household wealth distribution, showing that income inequality in Belgium is more significant than previously thought.
The Belgian Gini coefficient, an international measure of income inequality, averaged 30 points in 2022 according to the latest methodology, compared to a previous estimate of 25 points. A higher Gini coefficient indicates greater inequality.
“We have long assumed that Belgium experienced relatively low inequality compared to the rest of the EU. Although there is substantial income redistribution, the level of inequality has been notably revised upwards,” stated Rutger Kemels, an economist-statistician at the National Bank.
This underestimated income inequality arises from the systematic underreporting of earnings by the highest earners.
“We found that those with higher incomes tend not to fully disclose their earnings during surveys. The new methodology captures these incomes more accurately,” explained Roeland Beerten, head of statistics at the National Bank.
In 2022, the top 1.8% of earners accounted for 10% of all available income, while 27.5% of households with the lowest incomes also held 10% of the available income, meaning the wealthiest 92,000 households earned as much as the 1.4 million households with the lowest incomes combined.
The biggest inequality exists among the top 1% of households, whose average annual income is about €430,000. Available income encompasses earnings from work, assets (such as interest and dividends), and benefits, minus taxes and social contributions, excluding realised capital gains.
The higher the available income, the more is paid in taxes and contributions; however, this does not apply to the top 1% due to their reliance on income from assets, which benefit from favourable tax rules and exemption from social contributions, easing their tax burden and increasing inequality.
“Relatively speaking, the strongest shoulders do not bear the heaviest burdens,” commented NBB Director Géraldine Thiry.
Savings behaviour further highlights this disparity. In 2022, the bottom 20% of households had to "unsave" an average of €15,000, by borrowing, depleting savings, or depending on family support to make ends meet. The top 40% of households showed the highest saving rates, with over 46% of all Belgian households unable to save.
Social transfers in kind, such as education, healthcare, and cultural activities, help mitigate this inequality.
“These social transfers play a crucial role in reducing inequalities and enhancing the living standards of low-income groups,” noted the National Bank.
