Belgium Praised For Lowering Labor Tax Wedge

by Ulrika Lomas, Tax-News.com, Brussels

17 December 2015

The International Monetary Fund (IMF) has welcomed the reforms undertaken to lower the tax burden on labor in Belgium, after several years of recommending such reforms.

The IMF said that, after a year in office, the new Government has taken important steps to support job creation and address the cost of aging. In particular, Belgium has reduced the labor tax wedge through targeted cuts to social security contributions and income taxes.

The IMF said that these reforms should support job creation over the medium term, even if the revenue impact of the measures needs to be offset by potentially growth-reducing tax measures.

The Fund recommended that the efficiency and fairness of the tax system can be improved, and the tax shift could be partly financed through more efficient taxes on wealth, including by introducing a capital gains tax, shifting real estate taxes from transactions to recurring charges, and limiting the favorable tax treatment of rental income.

It said Belgium could further strengthen environmental charges and eliminate tax incentives for company cars. There is also scope to improve VAT efficiency, it said.

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