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Belgian VAT Hike To Fund Post-Election Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

11 March 2014


Belgium's main political parties have agreed that a reform of taxation must be carried out after the May elections, to modernize and to simplify the country's tax law, Finance Minister Koen Geens said.

In an interview with Het Belang van Limburg, Geens emphasized that the Belgian tax system is too complex. He underlined the need to reduce the number of tax deductions, which currently total around EUR60bn (USD83bn). Geens said that any reform will need "to keep an eye on the tax burden," and respect the fiscal autonomy of the Belgian Regions.

It is vital to shift the fiscal burden away from labor, to strengthen Belgium's competitive position, Geens said. Geen's Christian Democratic and Flemish (CD&V) party therefore has pledged to raise the tax-free allowance, to increase purchasing power to the tune of EUR3bn. This measure would be financed by an increase in value-added tax (VAT), and an increase in the excise duties levied on tobacco and diesel, he added.

Furthermore, Geens said that, if he is re-elected, he would expand the favorable tax regime benefiting savings account interest, to include other types of capital income and investment products in the future, such as shares and bonds. Savings account interest up to EUR1,880 is exempt.

Belgium's main political parties agree that the tax burden on labor must be reduced and transferred to other levies to support the labor market. They also favor a cut in the nominal rate of corporation tax to bring the headline tariff in line with the European average.

Finance Minister Geens hinted at a VAT rise last year when he revealed that the share of VAT in national revenues in Belgium is 48 percent, compared to the average among Organisation for Economic Cooperation and Development countries of 56 percent.

TAGS: Finance | tax | investment | value added tax (VAT) | Belgium | interest | law | Organisation for Economic Co-operation and Development (OECD) | corporation tax | tax thresholds | tax rates | tax breaks | tax reform | individual income tax | European Union (EU) | Europe

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