The measure aims to reduce taxes for the middle class by 1.2 billion euros.
LFinance Minister Vincent Van Peteghem (CD&V) puts on the government’s table a detailed proposal to cut taxes for the middle class by € 1.2 billion, reports The time . It is a surprising prelude to the great tax reform that he is preparing, writes the economic and financial journal.
“Some cases cannot wait,” said the Deputy Prime Minister in an interview with the daily. On the sidelines of the budget, the federal government is working on a restart and transition plan to give a boost to the post-corona revival and cool the labor market, which is struggling with a huge shortage. According to Vincent Van Peteghem, this requires accelerated tax intervention to make work, and especially working more, more attractive.
“In the inter-professional agreement concluded by the social partners in June, we noted that the increase in the minimum wage, which will be deployed over the next few years, creates a promotion trap. The government then agreed to do something about it. In my opinion, the solution is to abandon the special contribution for social security, which all workers have been paying since 1994. Jean-Luc Dehaene (CD&V) had introduced this contribution to bring Belgium into the euro zone but, like the rates and the limit amounts have never been indexed, the tax burden has now shifted from the upper middle class to the lower middle class. This also creates a trap for inactivity and promotion, ”analyzes the minister.
Focus on average wages
And Vincent Van Peteghem to give a concrete example. “Whoever works for the minimum wage pays 57 euros of special contribution for social security per year. If he obtains a salary increase of 100 euros per month through a promotion or an increase in the number of working hours, this contribution increases to 152 euros and he loses a full month of bonus. The increase in the minimum wage will reinforce this trend. What the government gives with one hand, it takes with the other. We have to do something about it now. During the coronavirus crisis, many people in difficult circumstances stayed at work, did not receive a corona bonus, and did not feel the increase in the minimum wage either. For these people, too, working should pay off more than not working. “
The vice-premier CD&V wants to gradually eliminate the special contribution, in four phases: 2022, 2024, 2026 and 2028. For a family with an average salary, this will mean a tax reduction of around 700 euros per year in 2028. The measure will cost 1.2 billion euros, but is expected to be budget neutral. This means that it is a transfer of charges (taxshift) to other income.
Several excesses of the system, as the minister calls them, are in his sights: the tax regime favorable to professional footballers, the tax advantage for second homes and the abusive application of the tax regime favorable to copyright. “Besides that, there is also the tax on securities accounts. “