Belgium’s generous tax breaks for the wealthy are almost as famous as the country’s chocolate.
A combination of sizeable exemptions to inheritance tax and low taxes on capital gains have long been the envy of the rich in neighbouring France and the Netherlands — so much so that many have moved their money across the border.
But could this fiscal paradise be coming to an end?
The Belgian government is rolling out a “tax shift” policy that Charles Michel, the country’s 40 year-old prime minister, says is aimed at fixing what has become one of the world’s most unbalanced tax systems.
While the details of the tax code are fiendishly complex, Mr Michel’s aim is simple: to support people on low to medium incomes by reducing the taxes and social security charges on labour — some of the highest in Europe — and to make up the shortfall by boosting taxes on capital.
Some changes, including a new financial speculation tax, were driven through last year and there are more to come. One of Mr Michel’s coalition partners, the Flemish Christian Democrats, is even pushing for a French-style wealth tax.
The reforms are a response to a growing outcry about the current system, which evolved over decades into its current state. Flashpoints included a scandal in 2013 when the now deceased Queen Fabiola used well-worn loopholes to avoid paying inheritance tax.
Public outrage among the normally stoic Belgians was also stoked the following year when it appeared that entrepreneur Marc Coucke would earn €1.45bn tax free, on the sale of his company Omega Pharma. (Mr Coucke subsequently denied the reports and said that, although exemptions were available, the way he organised his shareholding meant he would be taxed at 25 per cent.)
“What happens when you have high income tax levels and lots of tax breaks on capital — so on rich people — is that the tax that remains hits heavily on low-income earners and you can see that in Belgium,” Fredrik Reinfeldt, the former Swedish prime minister, who has written extensively about European labour markets, tells the FT. “The problem is that you will find a lot of people will end up outside the labour market.”
More on that topic can be found at Financial Times.