Belgium 'fails to provide services' to justify high tax rates, report finds

Despite the country's heavy tax burden, workers in Belgium are not getting value for money from the state, a new report has argued.

Timed to coincide with Belgium's annual “tax freedom day”, the study paints a worrying picture about the current quality of public services in the country.

This comes against a backdrop of new data that shows that, after France, employees in Belgium are the most heavily taxed in the whole of Europe.

The findings of the study, carried out by the Molinari Economic Institute in collaboration with Ernst & Young, was published on 15 July - the day designated as “tax freedom day” for labour force employees in Belgium. Coincidentally, 15 July was also the deadline for filing income tax returns in Belgium.

“Tax freedom day” is the one day of the year “when an employee theoretically stops working to pay social security contributions and taxes and disposes of his salary as he sees fit”. The higher a country's tax burden, the later in the year this day falls.

For example, in France, it is on 17 July while in the Netherlands it is 16 June and on 10 June in Luxembourg. In Cyprus, the EU country where employees reportedly are the least taxed, it falls on 16 April.

According to the study, the "effective tax rate" - including all taxes and social security contributions - of a Belgian employee is 53.5%, compared to an average of 44.1% in the EU27.

This means that, in Belgium, for an employee to receive €100 net, after all deductions, it is estimated that the employer has to pay €215 gross.

The report’s authors, in something of a damning indictment of the current situation, conclude that the "Belgian administrations fail to provide services commensurate with the sums they deduct from employees".

They note that among the 28 countries studied, Belgium is ranked 11th out of 28 in the overall OECD PISA (Programme for International Student
Assessment) ranking on educational achievement and is ranked 14th out of 28 in “happiness”, according to the 2022 United Nations World Happiness Report.

Belgium comes in at 19th out of 28 in quality of life, according to the 2021 Top Countries Survey.

Labour tax rates have remained stable in Belgium since the “tax shift” decided under a previous federal government and which reduced the cost of labour in Belgium.

The country’s ruling political parties are currently embroiled in ongoing discussions with stakeholders about a possible major reform to Belgium’s complicated tax regime.