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Belgium's Geens Rules Out Further Tax Rises

by Ulrika Lomas,, Brussels

26 April 2013

The Belgian Federal Government has decided to postpone until 2016 plans to return the public finances to budgetary balance, citing a shortfall of fiscal revenues. The Government had pledged to achieve a budgetary balance by 2015, within the framework of its stability program, negotiated with the European Commission.

Belgium's Finance Minister Koen Geens insisted that the Government has no plans to further raise taxes or increase income from social security contributions, beyond those initiatives agreed at the beginning of the month. Geens argued that such a move would be "counterproductive," given that the economy is already struggling to grow. The Belgian Finance Minister underlined the need instead to introduce measures aimed at boosting growth and stimulating the economy.

Back in March, Belgium's High Finance Council recommended that the Government delay plans to achieve a budgetary balance by one year. European Commissioner for Economic and Monetary Affairs Olli Rehn made clear that it is the structural figures that are of prime importance. The Belgian Government still aims to achieve a structural balance in 2015. Unlike the nominal deficit, the structural deficit does not take into account cyclical factors such as inflation.

The Belgian Government had already agreed additional fiscal measures totalling around EUR1.5bn (USD1.9bn) at the beginning of April, again due to poor economic growth and to the subsequent decline in fiscal income.

The Government said it would reduce spending on ministerial personnel by 0.5%, increase the tax on tobacco, increase the withholding tax applied following the liquidation of a business, and modify the notional interest regime to restrict the tax break. To encourage investment in small- and medium-sized companies (SMEs), the Government intends to progressively lower from 25% to 15% the withholding tax imposed on SME dividends.

At the time, the Government stressed that the measures taken protect the purchasing power of individuals and strengthen the competitiveness of businesses, in particular SMEs in Belgium. Supplementary initiatives were deemed necessary due to the deterioration of economic growth in Belgium since November 2012, and the subsequent dramatic decline in fiscal revenues, it argued. This had a "considerable negative impact on the public finances," the Government added.

The Government recently raised its 2013 deficit target from 2.15% to 2.46%.

TAGS: individuals | Finance | tax | business | European Commission | Belgium | interest | budget | tax rates | withholding tax | social security | dividends | inflation | Europe

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