THE TAX SYSTEM IN BELGIUM COMPARED TO OTHER OECD COUNTRIES

Transcription

1 THE TAX SYSTEM IN BELGIUM COMPARED TO OTHER OECD COUNTRIES TOWARDS A WELL-BALANCED FUNDAMENTAL TAX REFORM IN BELGIUM Bert Brys, Ph.D. 14 October 2013 Senior Tax Economist Centre for Tax Policy and Administration

2 Belgium faces many challenges.. Strengthen competitiveness of businesses & create a more attractive business & investment climate Stimulate economic growth innovation FDI Reduce debt level, at least as a % of GDP Increase government efficiency Ageing society and related costs: what are the financing needs today and in the future? Labour market activation & increased participation Do workers have the right skills? Coherence between federal and regional policies

3 which require a fundamental tax reform Trapped in a high-rate-narrow-base (un)equilibrium Need for rebalancing the tax mix in ways which are the least harmful for economic growth Inclusive and sustainable economic growth Look beyond the short-run Tackle problems at source wherever possible Who pays the tax is not necessarily the person who bears the tax Need for policy coherence

4 Belgium raises a lot of taxes Tax-to-GDP ratio (2010) Personal income tax 1200 Corporate income tax Social security contributions and payrolltaxes 4000 Taxes on property 5000 Taxes on goods and services Other¹ Other includies unallocable taxes on income and gains and custom duties paid to the EU where applicable 4

5 Regional immovable property tax reform: property tax revenue as a % of GDP in Other 4400 Taxes on financial and capital transactions 4300 Estate, inheritance and gift taxes 4200 Recurrent taxes on net wealth 4100 Recurrent taxes on immovable property

6 The standard VAT rate is slightly above the OECD average & equal to the EU average (2012 data)

7 ...but below average VAT efficiency

8 Environmental taxes as a % of GDP are low 6,0 5,0 4,0 3,0 2,0 max: DK med: HU BE min: ES wt av., EU-27 1,0 0,0

9 TOP average tax wedge for single taxpayers at average earnings without children (2012) 60 Employer SSC Employee SSC Income tax Belgium France Germany Hungary Austria Italy Sweden Finland Czech Republic Slovenia Greece Spain Estonia Slovak Republic Netherlands Denmark Turkey Norway Portugal Luxembourg OECD (35.6%) Poland Iceland United Kingdom Japan Canada United States Australia Ireland Switzerland Korea Israel Mexico New Zealand Chile

10 Also very high average tax burden for one-earner married couples at average earnings with 2 children

11 Relatively flat marginal tax burdens for single taxpayers without children for earnings ranging from 50% to 250% of the average wage (2012) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% marginal employer SSC marginal local income tax marginal family benefits net personal marginal tax rate marginal employee SSC marginal central income tax marginal tax wedge (sum of the components)

12 Slightly more progressive marginal tax burdens for oneearner married couples with 2 children for earnings ranging from 50% to 250% of the average wage (2012) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% marginal employer SSC marginal local income tax marginal family benefits net personal marginal tax rate marginal employee SSC marginal central income tax marginal tax wedge (sum of the components)

13 A highly redistributive tax and transfer system (late 2000s data) Gini coefficient (after taxes and transfers) Gini coefficient (before taxes and transfers)

14 High standard CIT rate lowered by the notional interest deduction OECD 2000 OECD

15 Belgium offsets high taxes on labour income by taxing capital income, to some extent, favourably Notional interest deduction prevents the debt-equity distortion there are many good economic reasons for the ACE! Belgium also treats royalty income favourably: 80% of royalty income is not taxed: effective rate of 6.8% Applies to: Income derived from the licensing of patents (royalties) Income derived from the use of patented products by the company itself or on its behalf No ceiling EU Parent-subsidiary rules + well developed tax treaty network Relatively low taxes on capital income at the personal level

16 Below average effective statutory tax burden on dividends (2012) Combined statutory rate 100% 80% 60% NLD FRA (highest proportional rate) 40% 20% NOR BEL ITAnew SVK (lowest proportional rate) 0% 2% 4% 6% 8% 10% 12% 14% Rate of return

17 Below average statutory tax rate on interest income (2012) Statutory tax rate 60% 50% 40% 30% 20% 10% 0% DNK GBR AUS CAN FRA USA CHE CHL NZL FIN IRL MEX NLD SWE NOR OECD ESP AUT BEL DEU ISR PRT ISL ITA JPN SVN POL SVK HUN KOR CZE TUR GRC LUX EST

18 Further improve tax efficiency: relatively high tax administration costs as a % of net revenue collected In some countries, including Belgium, Social Security Contributions are not included.

19 Challenging tax reform times lie ahead. Continue increasing government efficiency Shift from labour towards property, VAT, environment and, to some extent, capital income taxes Towards broad-base-low-rate equilibrium Get ready for Automatic EOI Base Erosion Profit Shifting Challenges Strengthen tax compliance & tax administration

20 THANK YOU