Taxes in Belgium are not only very high, they’re also unfair and inefficient

Is N-VA president Bart De Wever able to form the next Belgian government, or will he fail by tomorrow/Thursday? The answer to that question depends on the answer to another question: are Belgian politicians able to agree on an important tax reform? For decades, the answer to that last question was no.

Belgium has a reputation for being an exceptionally high-tax country. This is not the whole story: the rates are indeed exceptionally high, but there are also many exemptions and exceptions.

The result of this interaction between high rates and many exemptions? Belgian taxes are very high and also very uneven, unfair and inefficient. When you have an ordinary income as a worker, the taxes on your wage are very high. If you have an income out of capital you own, there are many different options, with many different tax rates. The same goes if you have a business: the first advice is to find a good tax consultant. And when it comes to environment and climate, the Belgian tax system tends to promote pollution.

This analysis is not new. You can find it in reports from the EU Commission, from the IMF, from the OESO for many, many years. Belgian experts agree. And even a large majority of Belgian politicians agree.

The others

So, why is this still a problem and why does it endanger -today- the formation of a new government?

A first answer is that Belgians are obsessed with taxes, and with the idea that they pay more than the others. Politicians constantly promote ideas to make ‘the others’ pay more. Left-wing parties want ‘the rich’ to pay more, right-wing parties come up with the opposite. The popular political discussion focuses on individual taxes, that should go up or down. The analysis that Belgium is in need of a broad and coherent tax reform isn’t seen as something that can make you win elections.

The second answer lies in the large budget deficit and sovereign debt of Belgium and its regions. If, in a broad tax reform, certain taxes are lowered, inevitably, other taxes have to go up. And thus, the lobbying starts as soon as the discussion on a reform starts. In recent years, those lobbies found most support with the liberal parties, MR and Open VLD. They are frightened to be seen as politicians that raise taxes. These days, it’s MR that blocks a capital gains tax De Wever proposes.

The result is not only that another reform Belgium strongly needs, is blocked. It also blocks the path towards healthy state finances.

Unless … Bart De Wever is able to find some sort of compromise. To make the partners of his coalition agree on a plan, a plan that will certainly not go as far as is necessary. But in Belgium, a small step in taxes is a giant leap for politicians.

_{© BELGA PHOTO PHILIPPE FRANCOIS}