Labor market reforms should get more people into work, but if Belgian taxation does not follow suit, it has already failed. In addition to being incredibly complex, our personal income tax is also very labor-inducing. Working does not pay in Belgium. Below are three tax advices that can save you money.
Advice 1: Temper your ambitions, don’t work too much and don’t earn too much
In Belgium you have a tax rate of 50 percent from an annual taxable income above 42,370 euros. The municipalities are also benefiting and levy so-called surcharges (about 7 percent on average), bringing the rate to 53.5 percent for the majority of the Belgian middle class. (The minimum wage is already in the 40 percent bracket). Then you can apply all kinds of deductions, which in turn cause other imbalances and additional complexity.
For comparison: in the Netherlands you pay a maximum of 49.50 percent from 68,508 euros, in France you pay a maximum of 45 percent from 157,807 euros. Germany does even better with a maximum of 45 percent from 270,500 euros taxable income. It is difficult to compare different national tax systems, but the conclusion remains, Belgium taxes labor as if it were a radioactive substance.
In fact, it would be even better to just stay at home, because if you receive unemployment benefits you get a tax reduction of 1,828 euros per year. A tax reduction that mainly goes to the long-term unemployed. Annual cost to the Treasury: approximately EUR 346 million.
Advice 2: preferably have 4 children
Every taxpayer receives a tax-free sum. That is, as the word says, a base amount on which no taxes are paid. In 2022, that will be 9,270 euros per year for every taxpayer.
However, if you have dependent children, that amount will be increased by 9,730 euros for three children and by no less than 15,740 euros for four children. So you do not pay taxes on no less than 25,470 euros of taxable income from four children.
Of course, the purpose of these extra allowances is justified to a certain extent, but one may wonder whether such discounts are still appropriate for large families in a society with increasingly smaller two-income families (with an average of 1.7 children), single-parent families and newly blended families.
In addition, a tax credit for dependent children has been introduced in Belgium. In some cases, large families cannot fully enjoy the particularly large tax-free sum. To remedy this situation, the unused portion of the tax-free allowance for dependent children is converted into a refundable tax credit, with a maximum of 470 euros per dependent child. So you get taxes back, even if you don’t pay any. Cost to the treasury: about 247 million euros.
Advice 3: Get married, or get divorced
If you have a partner, you can also actually start living together, the disadvantage is that you are a single taxpayer for the tax authorities, and the Belgian single is taxed the most in the entire OECD.
If the passion is too great, then definitely get married. But make sure your partner doesn’t earn too much. Then you can enjoy the so-called.’marriage quotient’. As a result, part of the working partner’s professional income will be allocated to the other partner, so that EUR 11,450 in income is taxed less or not. The working partner is taxed less and both partners benefit from the fact that there is and remains little income.
The measure dates from the time when the breadwinner model was still the norm and is therefore anything but an incentive to work more. The European Commission also points out these negative incentives to us every year to work. Annual cost to the treasury: about 584 million euros.
However, it can also be fiscally interesting to “divorce” your working partner. Our Belgian legislation subsidizes divorced partners. The working partner can then give a maintenance allowance to the other partner and deduct 80 percent of this allowance. Annual cost to the treasury, about 187 million euros.
- In Belgium you work and it is best not to earn too much.
- If you have a partner, one of the two best stays at home.
- Take care of 3 to 4 children and try to keep your income as low as possible.
The government helps you by throwing about 1.3 billion euros at it every year, not to mention the many social benefits such as increased child benefit, social rates for energy, cheaper childcare, etc.
Fair taxation does not mean taxing employees, the self-employed and companies even more, but ensuring that we turn the large-scale subsidy of passivity into rewarding work and ambition. Modernize the tax system, make it neutral with regard to the family form and lower the taxes on labor so that work finally pays.
The author Wesley De Visscher is a tax adviser at the N-VA study department and writes in his own name.