Belgium Maintains Highest Tax Burden on Labor Income Amid Legal Loopholes
A recent analysis reveals that Belgium continues to hold the position as the country with the highest tax burden on labor income, as confirmed by OECD data. Despite a reputation for excessive taxation, the country’s complex tax system includes numerous loopholes that allow for significant reductions in tax liability, reports 24brussels.
Individual income taxes, along with mandatory social security contributions, contribute to an overall tax rate that approaches 75% for earners above a modest threshold. In addition to income taxes, Belgians face various other taxes, including capital gains tax, VAT, and excise duties imposed at national and local levels.
However, the tax landscape is not solely characterized by high rates. Various mechanisms exist that enable individuals and corporations to minimize their taxable income through both legal and illegal methods. Among the legal options, students can work up to 650 hours annually without incurring taxes, while pensioners and part-time workers can benefit from the less taxed “flexi-job” system. High-income earners are also able to transfer their income from higher income taxes to considerably lower capital taxes via management companies.
The existence of numerous legal tax reduction avenues has given rise to a term in Dutch, “fiscale koterij,” which refers to unique tax exemptions designed to benefit specific groups. This multitude of exemptions fosters an environment where tax decisions are influenced more by regulatory advantages than by economic principles, thereby distorting the market.
Despite widespread awareness and calls for a thorough reform of the tax system, entrenched interests vigorously defend their preferential arrangements. Politicians are often receptive to lobbying efforts aimed at preserving these incentives, resulting in government attempts to simplify tax laws often backfiring and creating additional complexities.
This situation has created a paradox wherein, while many advocate for fairness and simplicity in the tax code, the existing system continues to favor a select group of individuals, perpetuating the need for tax consultants in Belgium’s economy.
© BELGA PHOTO THIERRY ROGE and HATIM KAGHAT
