OECD Recomends Tax Reforms for Belgium

July 13, 2011 Taxation in Belgium

Tax Reform in BelgiumBelgium needs to shore up its finance, lower tax rates, and introduce better eco tax measures, in order to protect itself from future economic disturbances.

Throughout the financial turmoil of recent years, Belgium has been praised for its handling of the downturn, having felt only a relatively minor impact from the disturbances, which was followed by a quick recovery. However the country is now at an impasse, seeing its debt-to-GDP ratio increase to 97 percent, which is putting an indefinite delay on the government’s plans to create funds for potential financial problems in the future.

In a report released on June 12th the Organization of Economic Cooperation and Development (OECD) identified shortfalls in the Belgian tax system which will need to be addressed if the country wants to decrease its debts levels.

According to conclusions drawn in the report, the government of Belgium will need to make significant cuts in government spending. The tax system will also need to be overhauled to remove distortions and inefficient biases. The key changes that were recommended to Belgium were a shift of tax burdens away from labor and productivity, and a general broadening of the tax base. Both measures should be complimented with a reduction in tax rates, with particular attention to cuts to personal income tax rates and corporate income tax rates.

It was noted in the report that the government of Belgium should make greater efforts to coordinate its environmental policies. New taxes should be instated to address housing and transport emissions, as these pollutants are not covered by the EU emissions trading scheme. A well designed and thoroughly planned carbon tax would be an ideal measure to address the issue of green taxation.

Photo by francisco_osorio