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European Salary Study 2013 - European employers also pay for the crisis
Belgian and French labour costs remain the highest in Europe
Deloitte announced the results of its European Salary Survey for the fourth time. The study indicates that Belgium faces very high employer costs, which is largely caused by the high and unlimited social security contributions.
Diegem, 7 December 2013 – Today Deloitte announces the results of its European Salary Survey for the fourth time. This large-scale study compares the salary costs, net income and net disposable income of 19 countries (an increase by two countries compared to 2012). The study indicates that Belgium faces very high employer costs, which is largely caused by the high and unlimited social security contributions. Since the crisis, social security costs for employers have increased in the majority of the countries surveyed.
It is still considerably cheaper to live in Belgium than in the richer European countries. This 4th edition also takes school costs into account for the first time when comparing net disposable incomes. In Belgium, the perception might exist that a lot of money is paid to the government but in almost all countries surveyed state education is virtually free of charge and Belgium therefore does not stand out.
Also new this year is the analysis in relation to legal and extra-legal pensions. Notable differences exist between the countries surveyed in relation to the proportion between paid social security and the statutory minimum pension. Finally, company pension plans in 74% of the countries surveyed are almost the rule for annual incomes of €75,000.
European employers feel a rise in labour costs
Belgium and France are still the leading countries when it comes to high social security wage costs due to high and unlimited social security contributions. However, in 11 out of the 19 countries surveyed, employers are feeling social security costs increase due to either an increase in the rate and/or the limit amount up to which contributions are due. The exception to the rule is the Netherlands, which reduced its social security rate by 2.12%.
Patrick Derthoo, Tax Partner at Deloitte Belgium and the person responsible for this study explains: “Belgium still faces a wage handicap due to high social security combined with a high statutory minimum salary and compulsory automatic indexation.”
Since the crisis, more and more countries are applying a top rate of ≥ 50%
For the first time since the crisis, almost half of the countries surveyed have increased their tax rate and/or tax scales compared to 2012. As a direct consequence of this, today a top rate of over 50% is in force in eight out of the 19 countries surveyed. The gap between Belgium and the rest of Europe is therefore gradually closing in relation to the top rate, but in Belgium the 53.5% is already being applied to taxable incomes of €37,330 upwards.
Non-working partner with two children rewarded twice in Belgium
A single person in Belgium is taxed more heavily than a married taxpayer who has a non-working partner and two children at charge. The tax burden difference in Belgium fluctuates between around €4000 and €5500, but the study indicates that the difference in other countries can be even higher (up to €14,090 in Geneva). The vast majority of the countries surveyed give a tax bonus for non-working partners and/or children at charge. In this context, the marriage quotient in Belgium was already criticized in the 3rd edition because it entails granting a bonus to legally cohabiting or married couples with only one working partner.
In Sweden and the United Kingdom, personal circumstances do not make a difference. Greece has also taken measures in its fight against the crisis, as a result of which single people are no longer being taxed more heavily since 2013.
Belgians still lives well but Belgium’s position on the European rankings slightly deteriorates
Costs of living and housing are undergoing a general decline in Europe. Contrary to the trend in Europe, these costs are rising slightly in Belgium. As a result, Belgium must generally drop a few places in the ranking of net disposable income. Nevertheless, Belgium remains an attractive place to reside and live in. Brussels is still considerably cheaper than Amsterdam, Luxembourg, London, Geneva and Paris, among other places. The gap is however closing. The costs of primary and secondary education were also investigated this year, but this did not affect the order on the ranking list; virtually all countries surveyed offer free state education.
R&D measure makes Belgian employer the cheapest in Europe
For companies operating in research and development, Belgium has managed to neutralize its wage handicap and to even become the cheapest country. The R&D measure currently allows Belgian employers to immediately recover 80% of the withholding tax due on behalf of researchers.
Applying this measure puts Belgian companies in the highest wage categories a step ahead of our main competitors in R&D, namely France, Germany, Luxembourg, the Netherlands, Switzerland and the United Kingdom.
Patrick Derthoo: “Apart from the Netherlands, nowhere else applies such an advantageous and structured system which so strongly incentivises research and development. More effective marketing of this important R&D measure could perhaps better position Belgium on the international scene.”
European savers are being taxed more heavily again
With respect to the taxation of passive income (interest, dividends and capital gains) Belgium comes out just above the European average of 24% for interest income as well as for dividends (2012: 23,42% for interest income and 25,13% for dividends). Despite the apparent stable European average rate on interest and dividends, survey results show that 8 countries (Ireland, France, Portugal, Greece (only interest income), Luxembourg, Slovakia, Belgium and Denmark) did increase their tax rates over the last year. Belgium is the outlier as it increased the tax rate on interests from 15% to a standard tax rate of 25% over a two-year period. Greece provides some counterweight by reducing its dividend tax rate from 25% to 10%.
High social security contributions do not necessarily guarantee a high statutory pension
There are significant differences between the countries surveyed in view of the proportion of social security payments on the lowest wages to the minimum statutory pension. On the one hand, Luxembourg and Ireland are the group of countries where minimum pensions are proportionally higher than social security contributions, and on the other hand, remarkably enough, there is France: the minimum pension in France amounts to only 41% of social security payments. Belgian employers and employees pay the second highest social security contributions in this situation and the minimum statutory pension to which a Belgian pensioner is entitled amounts to 109% thereof.
Pension benefits can also be accrued through employment (2nd pillar). This is actually an obligation in Switzerland and, since 2012, in the United Kingdom. This is rather remarkable since the study shows that company pension plans in more than 60% of the countries surveyed are rare or non-existent for lower incomes, whereas in 74% of the countries surveyed they are virtually the rule for an annual income of €75,000.