Belgium is one of the most highly taxed countries in Europe, with a very particular setup to ensure health care and social security, but according to an OECD report, single people without children who are paid the average wage have to deduct nearly 52.3% of their salary for tax purposes, reports RTBF.
The median salary in 2019 was €3,486, according to Statbel, Belgium's statistical office. On this salary, a single person without children would then lose €1,812 of their tax, leaving them with a remuneration of €1,674.
In other European countries within the OECD, the wage tax percentage for single people without children is lower. On average, other European citizens are taxed 41.3%, a difference of more than 10M compared to Belgium. In the above example, their net remuneration would be around €2,057. However, it is worth noting that median salaries differ from one European country to another.
For single people without children with a higher-than-average salary, taxes increase to 59% of their salary. For those below the average, tax decreases to 46%.
Couples with children benefit
In contrast to single people without children, couples with children who receive an average salary benefit. Taxes are still high, but for married couples with two salaries and two children, the share of taxes was at 45.2% in 2021. Belgium holds the OECD tax record for couples with children too.
Taxes and social contributions for married couples with a single average income and two children reached 37.2% of their salary.
For a single parent of two children receiving two-thirds of the average salary, their gross salary would be 29.35%. Only Sweden does worse with a 32.4% tax rate.
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The high taxation of singles without children compared to couples with children comes down to the number of dependents.
"The progressivity of tax increases quickly, even for low incomes. When you do not benefit from a special regime, special deductions, you are heavily taxed," explained Edoardo Traversa, Professor at the Faculty of Law of the UCLouvain.
"One of the ways provided by the legislator to reduce the progressivity of the tax is to have dependents (children, elderly parents, etc.). The part of the income exempt from tax increases according to the number of dependents and single people without children generally do not benefit from it. Moreover, the increase in the share of tax-exempt income increases in proportion to the number of dependents," Traversa added.
Decreasing payroll tax
The OECD data suggested that wage taxation has been declining for the past 20 years. "Taxation on labour was introduced in the 1960s when there was full employment. Wages only increased, wages increased and we taxed more. People did not realise the increase in taxes," said Traversa.
“Today, wages are stagnating and despite indexation, the tax rate on wages is very high. This is why some governments have made the political choice to reduce wage tax in recent years. So the taxation of wages is decreasing in Europe because wages are increasing less than other forms of income."
Stagnating purchasing power
Payroll taxes may be decreasing but gross remuneration has not increased as much as before. And in terms of purchasing power, wages have stagnated since the 1980s while prices have risen. Purchasing power has actually decreased for the poorest part of the population, even as taxation has decreased.
Traversa believes rebalancing taxes is necessary. "Today, the elderly are those who have the least chance of falling into poverty, unlike young people. And yet, it is the young who often pay more wage tax."
"Several options are therefore on the table to rebalance the balance: increase tax on consumption (VAT, excise duties, taxes on certain products, etc.), taxes on assets (real estate, inheritance, etc.) or corporate tax (taxes on multinationals, on excess profits, on dividends, etc.). But all this will depend on the political choices that may or may not be made in the future."