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PwC Exposes Belgium's High Corporate Tax Burden

by Ulrika Lomas,, Brussels

22 November 2013

Belgium is continuing to fall in global rankings for the level of tax burden, despite an observed slight decline in the tax burden on businesses.

A new report from PwC and the World Bank Group, "Paying Taxes 2014," revealed that of the 189 countries surveyed, Belgium ranked 161st globally by overall tax burden, compared to 155th last year.

The tax burden on enterprises in Belgium currently amounts to a total tax rate (TTR) of 57.5 percent, down 0.2 percent compared to last year, although significantly higher than the global average of 43.1 percent and the European Union average of 40.9 percent. Its neighbors, Germany, the Netherlands, and the UK, which have TTRs of 49.4 percent, 39.3 percent, and 34 percent respectively, are doing considerably better. Only France, with a TTR of 64.7 percent, is faring worse.

Commenting, Frank Dierckx of PwC Belgium, said: "Worldwide, the TTR has fallen by 9 percent on average since the study was first carried out in 2004, but in Belgium it was more or less unchanged between 2004 and 2012."

Dierckx warned: "Although it is stable, it is still too high. We have now seen a very slight fall, but in relative terms our country's position is continuing to decline. We have slipped six places in the ranking since last year. Even if we disregard the four countries that were included in the study for the first time this year, all of which are performing better than Belgium, we have still slipped two places. The bottom line is that we are losing ground, relatively speaking."

Furthermore, the report revealed that there has been a gradual slowdown in the rate at which the TTR is falling in most parts of the world. This is due to the fact that many economies are trying to find a balance between generating higher tax income and stimulating growth, PwC maintained.

Making clear once again that there is no room for tax increases, Dierckx underscored that it is essential that the Belgian Government cuts spending, to in turn be in a position to reduce the tax burden on labor.

Insisting that, "the time has come to take action and effectively reduce labor taxes and social contributions, particularly because the bulk of the total tax burden on businesses consists of labor taxes and social contributions," Dierckx noted that in Belgium labor taxes and social contributions amount to 50.3 percent. This is significantly higher than in Germany (21.8 percent), the Netherlands (18.2 percent), the UK (10.6 percent) and is also much higher than the EU average of 26.24 percent, which is "obviously bad for competitiveness and for economic growth" in Belgium, Dierckx stressed.

Underlining the importance of economic growth, Dierckx explained: "Labor taxes and social contributions clearly need to be reduced in our country, but the budget does not offer any scope for this, chiefly because essential cuts in government spending have not been made."

Finally, PwC emphasized the importance of reducing the administrative burden on businesses. Highlighting the fact that worldwide businesses take on average 268 hours a year to comply with all tax obligations, making 26.7 tax payments annually, PwC noted that in Belgium, the compliance burden is 160 hours, while the number of annual payments is 11. This is less than the European average of 191.8 hours and 12.4 payments a year, it noted.

Yet PwC alluded to the fact that 32 economies took steps to simplify the tax paying process between June 2012 and June 2013. For the third year in a row, the most common tax reforms involved the introduction or improvement of online systems for filing tax returns and paying taxes, PwC stated.

Concluding, Dierckx remarked: " Worldwide, the average compliance time has fallen by 55 hours and the number of tax payments made by businesses has fallen by seven since the first edition of Paying Taxes was published in 2004. This positive trend has not been seen in Belgium, however. The number of tax payments has not changed compared to last year, while the compliance time has increased from 156 to 160 hours."

He ended: "Simple, transparent tax systems are essential in order for a country to become an attractive place to do business. The increase in compliance time in Belgium would seem to indicate that simplifying administrative aspects, at least in the area of taxation, has not produced immediate results in our country. In an international context, Belgium is not doing particularly badly in terms of compliance time. However, other economies are starting to make improvements in this area and so we may be overtaken in this area, too, at some point in the future."

TAGS: compliance | tax | business | tax compliance | Belgium | Netherlands | budget | corporation tax | tax rates | France | Germany | tax reform | Europe | Tax

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