There have been renewed calls for the Belgian government to honour its pledge and reform the current system of taxation in Belgium, to remove the current disparity between the taxation of labour and the taxation of wealth, and in so doing shake off the country’s image as a 'tax haven'.
The fresh debate has been sparked following accusations that French LVMH Chief Executive Bernard Arnault has applied for Belgian nationality to avoid paying taxes in France, at a time when new Socialist French President François Hollande plans to significantly increase taxes on the rich over the next two years to redress the public finances.
Even though Belgium is no longer considered internationally to be a so-called ‘tax haven’, a jurisdiction deemed uncooperative in tax matters, as it has partially lifted its traditional banking secrecy, the disparity between the taxation of wealth and the taxation of income from work remains.
In Belgium, the tax burden on income from work has been referred to as ‘confiscatory’ by the Organization for Economic Cooperation and Development (OECD), with the overall tax burden standing at around 50%. In contrast, the tax burden on wealth pales into insignificance.
Belgium, it seems, attracts entrepreneurs. There is no wealth tax, income from capital is subject to very little taxation, and the system of taxing corporate profits is one of the most attractive in Europe. While the headline rate of corporation tax is 34%, in line with the headline rate in France, companies benefit from generous deductions, and a notional interest deduction (NID) is available to level the playing field between companies that borrow and those that self-finance, and is calculated on the amount of equity.
Although the government of Prime Minister Elio Di Rupo has indeed pledged to address the current imbalance in the tax system, it remains to be seen as to whether he is brave enough or indeed able to upset the apple cart and eliminate once and for all the tax imbalance..
TAGS: tax | banking | entrepreneurs | banking secrecy | corporation tax | Belgium | interest | Wealth
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