Tax shift deal reached: how will this impact on you?

The Belgian government has reached a deal on a budget review for this year, next year's budget and also a tax shift. The latter involves a number of new taxes, but negotiators claim that at the same time, low- and middle-income families can look forward to a higher net income as other taxes (on labour) are being scrapped. However, electricity will become more expensive, together with diesel, and a so-called health tax is being introduced mainly targeting soft drinks.

Key ministers of the right-wing federal government (Francophone and Flemish liberals, Flemish nationalists and Christian democrats) had been discussing the budget plans and the tax shift for 4 days, the national holiday included. PM Charles Michel announced via Twitter (photo) that an accord was reached in the early morning.

They have agreed on a spate of measures to generate more income. This cash will mainly be used to reduce the tax burden on labour, which should improve the competitiveness of Belgian businesses compared to their colleagues in neighbouring countries (and thus to reduce the so-called wage handicap). The average working Belgian should also benefit from the tax shift, welcoming 100 euros more per month.

Following is a list of measures that will have an effect on your personal budget as the tax shift will come into force the coming 3 years. Let's start with the good news: tax reductions. Next up are new taxes or a series of products that will become more expensive. Finally, there are also new austerity measures and spending cuts. 

Net income to go up and good news for employers

  • In order to tackle the so-called "wage handicap", the ruling coalition has agreed to lower the employers' health care contribution to 25 per cent coming from 33. The aim is to reduce the wage burden for employers and to create new jobs. It will become cheaper to hire new people. Night work and shift work will also become cheaper.
  • The tax shift should also benefit lower- and middle-income families. As the tax system will be changed, they will have 100 euros more monthly after tax. 

Health tax, VAT on electricity up, diesel more expensive

  • Excise duties on diesel, alcohol and tobacco will go up.
  • A kind of health tax will be introduced targeting unhealthy food or drinks such as beverages containing high sugar levels.
  • Taxes on saving products such as bonds (but not the classical savings accounts) are increased from 25 to 27 per cent
  • VAT on electricity had been reduced to 6 per cent under the previous Di Rupo administration, but will now go back to 21 per cent. This reduction was meant for families and private households, but it was abused by bigger players and  companies. This left the present government with a gap of about 500 million.
  • A so-called speculation tax will be introduced before the end of the year targeting investors selling shares on the stock market within 6 months.
  • The Cayman tax had been announced earlier, and will now come into force. This tax is meant to step up the fight against rich Belgians moving their cash to secret off-shore accounts in order to dodge taxes.

More efficiency

The tax shift should represent a total of 7.2 billion euros by 2018. However, negotiators also to find extra cash to reduce the budget gap. 978 million had to be found only to keep this year's budget balanced.

In order to keep the deficit below 2.5 per cent of the GDP, the government has announced "efficiency measures" worth 700 million. No further details were released.

On top of this, public spending will also be cut further in the area of unemployment benefits and early retirement, although the impact there should be relatively small. The health mutual fund will also have to make an effort of 100 million.