The Federal Government is planning to introduce a major tax reform which could see net salaries in Belgium increase by an average annual amount of €835 as early as next year.
Under the proposed scheme, which was presented to the Government's coalition partners by Minister of Finance Vincent Van Peteghem (CD&V) on Wednesday, Belgium's tax burden would undergo a major shift from labour to capital and consumption — thereby significantly increasing the take-home salaries of the vast majority of Belgians, l'Echo and De Tijd report.
"Belgium is today the leader among the OECD countries in terms of labour taxation," Van Peteghem said on Wednesday. "There must be a shift from some of the burdens on work to wealth and consumption."
Van Peteghem further explained that the proposal would reduce the tax burden on labour by almost €6 billion from 2024 to 2026, but that it would nevertheless be "budgetarily neutral" so long as one "takes into account reasonable return effects".
He added: "If, at some point, the financing measures were to bring in more than expected, these additional revenues will be used to increase net salaries."
Digging into the details
Under the new scheme, the tax-exempt portion of Belgians' salary would increase from €10,160 to €13,500, while the threshold for entering Belgium's 45% tax bracket would rise from €46,440 to €60,000.
The reform is expected to especially benefit childless single people. In particular, the average salary of a single person without children with a gross monthly salary of €2,600 will rise by €1,270 per year, while those with a gross monthly salary of €6,000 will experience an even larger annual increase (€1,513).
The tax reduction on labour will be partially compensated for by an increase in taxes on consumption. In particular, the VAT rate on a vast number of goods will rise from 6% to 9%, while excise taxes on tobacco will increase and the 'reduced' VAT rates on coal and diesel will be eliminated.
To protect the most financially vulnerable Belgians, however, a 0% VAT rate on essential goods including vegetables and fruits, medicines, nappies, and public transport will be introduced. Moreover, the current 6% VAT rate on gas, electricity, mains water and domestic heating will be retained.
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Wealth, too, will be taxed more heavily. In particular, a reform of taxes on employees' stock options will be implemented, measures that prevent the double taxation of multinationals' profits will be eliminated, and the annual tax on securities accounts worth more than €1 million will be doubled.
However, some financial analysts worry that such wealth taxes could lead to an overall decline in investment in Belgium, and might even encourage some investors to withdraw their money from the country altogether.
"This measure risks reducing the tax attractiveness of our country by discouraging individuals, but also companies, from coming to settle in Belgium," Denis-Emmanuel Philippe of Bloom law firm told l'Echo. "Nor can it be ruled out that it encourages some wealthy families to go into exile to countries where wealth taxation is more gentle, for example Switzerland or Luxembourg."