The corporate tax reform should occur within a framework of budget neutrality. The Deputy Prime Minister, Kris Peeters (of the Flemish Christian Democrats) cautioned this yesterday (Wednesday). This follows the articles in the media on the reform plans of the Finance Minister, Johan Van Overtveldt.
During its conference at Val-Duchesse, the federal government put this reform amongst its priorities for the coming year. Several media outlets had reported Mr Van Overtveldt’s willingness to reduce this tax to 20%, in place of the current 33.99%, balancing the abolition of some reductions.
The so-called “grand paymaster” is to present a proposal to his colleagues next month.
M. Peeters stresses that the campaign should be budget neutral and that this neutrality should remain within the budgetary item of “corporate tax”. There is, otherwise, no means to compensate for it.
“This is a very important condition, for fruitful discussion to take place and all future legal insecurity to be avoided,” the Minister states.
Mr Peeters relies upon the recent opinion of the High Council of Finances (the HCF, which advises the FPS Finance), “The opinion of the HCF is for us the basis upon which any proposal or scenario should be considered.”
He stresses, “A potential reform of corporate tax should not only be budget neutral but it should also lead to the greatest form of fair taxation between SMEs and multinationals, and even more so between corporate tax and personal taxation.”
He further added, “It should also contribute to a fairer tax system, stimulating both employment and economic growth.”
At the end of July, the HCF had envisaged two avenues: a reduction of corporate tax to 25% and another to 20%. The second avenue entailed the end of notional interest on shares, the increase in withholding tax on dividends and surpluses upon winding-up.
However also only “sufficiently significant alterations” in cost reductions were included within the second proposal, to avoid too many individual businesses incorporating as companies. The HCF considered that the tax base ought to be enlarged by 70%. It also cautioned against the risk of fiscal competition with other European states.