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Deloitte Tax & Legal Forum 2014

Belgian tax and financial professionals call for reduction in wage costs

Minister for Finance Koen Geens shared his views on fiscal reform. In response to the request for a wage cost reduction to boost Belgium’s competitiveness, Geens emphasised that although a lot of effort has already been made, more is needed.

Brussels, 11 February 2014 – At Deloitte’s annual Tax & Legal Forum that took place yesterday afternoon, Minister for Finance Koen Geens shared his views on fiscal reform.  In response to the request by the tax professionals present for a wage cost reduction to boost Belgium’s competitiveness, Geens emphasised that although a lot of effort has already been made, more is needed. The government has already approved over 5 billion Euros of tax reductions, but the wage gap with neighbouring countries needs to be reduced further, requiring a further 1.25 billion Euros. The Minister also underlined that there is a large consensus to further reduce labour costs but this would require a tax shift to other sources. Using facts and figures, Minister Geens illustrated various tax shift scenarios which will be on the table of the next government.

During the Forum, a brief survey was conducted among the 250 participants.  Most of the respondents present hold a position in their company’s tax department (53%). Positions in financial services (19%) were also represented.  The respondents primarily represent multinational groups, but also Belgian companies and small and medium-sized enterprises.  The survey gauged their reaction to the measures taken by the Di Rupo I and Di Rupo II governments in connection with the budget measures in 2012 and 2013.

The main conclusions are as follows:

  • 24% of the audience suppose that the law regarding the harmonisation of blue and white collar workers, in force since 2014, entails an increase in wage costs for their company/group. 27% do not know (yet) what the concrete impact of the law regarding the harmonisation of blue and white collar workers will be for their company.
  • Two out of three companies surveyed indicated that, in the last 2 years, their company or group was subject to a formal tax audit. This result confirms the increased inspection activity of the Belgian government in the past few years.   
  • According to 64% of the respondents, the announced fiscal reform should focus on a combination of lowering tax rates and simplifying tax rules. Only a minority of the audience (13%) prefers absolute stability over any changes.
  • Polled about the most striking measures of Di Rupo I and II, tax professionals are least happy about the reduced benefits of the notional interest deduction (43%). Ranking second is the increased taxation of company cars (36%). The tax professionals present at the event believe that a reversal of these measures would have a positive impact on their companies.
  • In line with last year’s result, 56% of the audience feels that lowering wage costs is the most important action to ensure Belgium’s attractiveness to foreign investors. On the other hand, 13% believe that the focus must be mainly on fiscal stability and a further 13% believe that the notional interest deduction must be maintained in order to preserve Belgium’s appeal to foreign investments.  Last year, 59% of the respondents agreed that a reduction of the wage cost was to be the government’s top priority in order to encourage investments in Belgian companies. At the time, 18% preferred a percentage reduction of company tax. 81% of respondents had labelled notional interest deduction as important to very important for a company. Piet Vandendriessche, Managing Partner Tax & Legal at Deloitte comments: “This is a remarkable result as 75% of the attendees are fiscal and financial experts who nevertheless prefer a wage cost reduction over pure fiscal measures.”
  • On the assumption that additional taxes are needed to reduce wage costs and to meet the budget targets set by Europe, 32% of the audience would accept an increase of the VAT rate or an extended application of VAT, followed by an increase of environmental tax (26%) and finally taxing property on the basis of rental revenue / rental value (21%).  Hardly anyone in the audience was in favour of an increase of personal income tax or a further increase of withholding tax (including the abolition of the tax-exempt amount).
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