Corporation tax cuts would leave €4.5 billion deficit, says Peeters

Federal economy minister Kris Peeters (CD&V) has raised doubts over a plan by his government colleague, finance minister Johan Van Overtveldt (N-VA), to cut business tax to 20%, apparently without any source of alternative financing.

The tax cut from 34% to 20% would leave a €4.5 billion hole in the federal budget. To make up the deficit, a capital gains tax was proposed on income accrued when all or part of a business was sold. Another alternative was an increase in the tax on investment income from 27% to 30%.

During ongoing negotiations, Van Overveldt has taken the position that neither of those two options are necessary. “I’m concerned that the lowering of tax on corporations may not be able to be organised in a way that is budget-neutral,” Peeters (pictured) told VRT radio. “The basic question now is how on earth you can go down to 20% when you know that the tax base has to be grown by €30 billion?”

Peeters and his party had favoured both of the alternative measures, although the rise in investment tax would bring in only €330 million. The scrapping of the so-called notional interest deduction would raise about €3 billion. However, that measure would run the risk of an exodus of multinationals, which are allowed to write off some income taxable here.

Peeters said he would wait to see the result of internal government discussions based on Van Overtveldt’s note, but warned that, if necessary, “I will come forward with concrete proposals of my own on fair taxation”.