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Ageing population will affect funding of communes

© Belga
The ageing population will affect commune income levels, with striking variations in the impact of income tax receipts across Belgium.
© Belga

The ageing population will have significant impacts on commune funding sources. This is, in particular, because of the expected reduction in local tax revenues and the additional income tax. This emerges from a study in the field led by Belfius.

Belfius states, “By 2030 (on average for Belgium), the demographic evolution will involve a 14.2% per capita loss in income tax received by the authorities. This means that, in 2030, the present per capita increase in value of 1% would represent no more than 85.8% of its 2015 value. For the large majority of communes, the amount yielded from income tax would therefore, in the likely scenario, be negatively impacted by the ageing population featuring in the over 60s age bracket. However, the effect would not be homogeneous.”

This average 14.2% decline indeed hides significant disparities, according, in particular, to the size of the commune. Thus, in Flanders, the impact is projected to vary from a 38.1% loss to a slight increase of 0.5%. In Wallonia, it is thought the impact may vary throughout the commune from -35.4% to -5.1%.

Brussels communes are distinguished from the rest of the country, owing to populations becoming younger “but having a reduced level of income. This weighs heavily upon per capita income tax yields,” Belfius stresses.

The bank adds, “Generally, large cities appear to be less impacted, owing to their having a particular dynamic. The impact is lower as income tax is a proportionately less significant feature in their revenues.” Thus, the impact on income tax yields is only an average decrease of 8.8 % for the thirteen Walloon and Flemish communes that are included within the study, and the population of which is greater than 75,000 inhabitants.

Belfius further stresses, “The ageing population and the increasing numbers retiring, are not the unique causes of additional expenditure in terms of funding both pensions and infrastructure for the elderly. They also lead to a gradual erosion of communes’ fiscal bases (in particular from the additional income tax). This will structurally modify their overall funding base.”

The bank adds, “This impact on communal receipts, which is already perceptible in some communes, will however operate progressively and be very variable. It will depend upon the local socio-demographic structure.” Belfius further states, “the most affected communal entities will be forced to take compensatory measures (both in receipts and/or expenses) so as to ensure that the commune budget remains balanced.”

The Brussels Times