Recovery package slashes VAT on electricity

The Belgian Government has reached agreement on an Economic Stimulus Pact, ESP. The Pact is supposed to boost economic activity across the country. The measure that consumers will notice most readily is a reduction in the sales tax, VAT, on electricity. By 2018 the government intends to legislate to ensure that Belgian wage costs are no higher than those in neighbouring economies.

VAT falls from 21% to 6%, a measure that will stay in place at least until the end of 2015, when the impact of the reduction will be evaluated. The measure is intended to shore up the competitive position of Belgian industry because at the minute businesses pay a higher VAT rate on electricity than most of their foreign rivals.

Wage costs will be cut by 450 million euros in 2015, 2017 and 2019. A third of the reduction will be achieved by a general measure affecting all workers; a further third will benefit low earners, while the remainder will be cut in industries that are struggling like car assembly.

The regions will now have to examine how they too can contribute to the recovery.