On Tuesday, 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 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.
Charges on pollution
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.
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.
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"We implement the European directives and guide everyone in the change to a more healthy and sustainable society. We choose to no longer be blind to the social costs of pollution and consumption." A tax-free basis will also be provided for both activity and replacement income, asset income and consumption.
That 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.
Within the capital income, everyone will be offered an annual general exemption of €6,000 via the tax return. By making an amount of income from savings and investments tax-free, the reform ensures that the small saver or investor is not affected and that everyone can build up wealth.
"It will take courage and open-mindedness from each of us to effectively implement these choices," Van Peteghem added. "But the time is now to work towards a taxation system that stimulates economic growth and supports social progress. A tax system that strengthens our welfare state."
