Finance minister plans to make working Belgians 835 euros better off
Belgian finance minister Vincent Van Peteghem (Flemish Christian democrat) has unveiled plans to make everybody who works 835 euros better off a year after tax. If approved Mr Van Peteghem’s tax reform plans start next year and should cut tax levels by 6 billion euros, while not damaging the health of the nation’s budget.
The finance minister wants to modify income tax bands to ensure fewer people have to pay the top 50% tax rate. People would also start paying tax only when they are earning more. The minister plans to phase out tax advantages for couples. The 6% and 12% VAT rates would be merged to 9%. 6% would remain the rate on energy and water. For essentials a zero rate would be introduced. The tax on investment accounts would be doubled, but a wealth tax is ruled out for now.
Belgians would only start to pay tax on an annual income above 13,500 euros instead of 10,160 now. The highest 50% tax rate would kick in at 60,000 euros and not at 46,440 as now.
The tax reforms are good news for singles. A single with kids earning 3,200 euros before tax would be 1,660 euros a year better off.
People earning an income from work would be better off. People on benefit won’t lose out but won’t become any richer.
“These are measures that ensure people who work are given an incentive” Mr Van Peteghem told VRT. “We want to convince people hesitating whether or not to take a job and wondering whether it’s worthwhile to move to the labour market. The labour market is incredibly tight. Businesses are looking for staff. The activity level isn’t what it should be. We want 80% of people of working age in work”.
The finance minister’s ambition is a sustainable and healthier society. This explains the zero VAT on fruit and veg, medicines, public transport, nappies and sanitary products.
Products like chocolate paste and coca cola would become more expensive as they move to 9% VAT.
Mr Van Peteghem’s plans still need to be agreed in cabinet. The governing Flemish socialists have already made it clear a more expensive shop isn’t an option.
Mr Van Peteghem counters: “We are world champions when it comes to taxing labour, while taxes on consumption are among the lowest”.
For major tax reforms Belgians will have to wait until after the next election due in 2024. Mr Van Peteghem’s plans if approved will be implemented next year, in 2025 and 2026.
The finance minister says his tax plans involving tax cuts of 6 billion euros should not impact on the budget. He’s counting on the changes generating more taxes to make good the 6 billion shortfall.