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AmCham Belgium Calls For Bolder Belgian Tax Reform

by Ulrika Lomas,, Brussels

02 October 2017

The American Chamber of Commerce in Belgium (Amcham Belgium) has said that while the governing coalition's decision to cut corporate tax is welcome, proposed tax changes will not go far enough to improve Belgium's competitiveness.

On September 28, Amcham Belgium issued a series of recommendations to improve Belgium's competitiveness, including in the area of taxation.

The document argues that the Government's Summer Agreement will reduce the headline rate of corporate tax - currently one of the highest in the OECD - but leave the overall burden on business largely intact because of the need for revenue neutrality.

Amcham Belgium said that some of the revenue offsets "send an unwelcome signal to investors, missing the opportunity to shift toward a more collaborative relationship between the tax administration and taxpayers."

In July 2017, Belgium's coalition government agreed to a 2018 Budget package that includes substantial cuts in the rate of corporate tax.

Currently, Belgium's corporate tax including the solidarity contribution sits at 33.99 percent. The Budget will reduce the main rate of corporate tax to 29 percent in 2018, and lower it further, to 25 percent, in 2020.

The 2018 Budget also cuts corporate tax for small businesses meeting certain requirements on director remuneration to 20 percent on the first EUR100,000 (USD118,000) of income, instead of 25 percent tax under current rules.

The corporate tax rate reductions are to be offset by changes to the notional interest deduction (NID) rules, which help companies to substantially reduce their effective rate of corporate tax.

In addition, limitations will be applied to the basket of deductions, including the NID, loss carry forwards, and the dividend received deduction, that companies can offset against income.

Amcham Belgium said that as a result of the planned corporate tax cut, Belgium's tax rate would no longer be an "outlier." However, it noted that a corporate tax of 25 percent would still be above the EU average, and said that cutting the rate to 20 percent should be a "critical goal" of the government.

It also called for "clear and consistent rules, where changes in the law can be anticipated and planned for," and urged the Government to retain the NID rules, which have been the subject of frequent discussions, in their current form.

"The Notional Interest Deduction has been subject to debate and change ever since its introduction, and the latest tax reform proposal is no exception," the document stated, before going on to observe that:

"Further changes to the NID would not only undercut its effectiveness, but also send a negative signal to investors about the stability of the country's corporate tax environment and incentives to invest. The NID is especially important for treasury and other functions which are typically associated with headquarters."

The association also criticized the current mix of federal and local taxes, with corporate tax imposed at the federal level, and property taxes on material and equipment levied at the local level.

"The property tax rates and modalities differ between the regions, resulting in complexity and uncertainty, particularly for companies which operate across the country," the document said.

TAGS: environment | tax | small business | business | Belgium | property tax | interest | law | corporation tax | tax rates | tax reform

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