Belgium VAT rate increase 2014
- European News
- 12 March 2014 | Richard Asquith
Belgium has indicated that it plans to raise its standard VAT rate from the current rate of 21% to fund cuts to the labour tax regime.
Shifting the tax burden from business to consumption
The news came from the Finance Minister, Koen Geens, who said the rise would be agreed after May's general elections. This rise has been settled with the other leading political parties, so will go ahead. However, it is not clear yet what the rise will be - probably by 1% to 22%. The EU average VAT rate is over 21%
The extra Belgium VAT rise will be used to fund a reduction in the labour tax rate, which is close to the highest in the European Union, and hurting job creation. In addition, there may be a cut in corporate income tax which is 33.99%, compared Netherlands at 25% and the UK at 22% and falling. The EU average company tax rate is 22.75%.
Belgium is one of the few EU countries that has not raised its standard VAT rates since the start of the financial crisis. Italy hiked its VAT rate to 22% recently. Other countries which have raised their rates include Spain, Portugal, France, Netherlands, UK, Ireland and most of Central and Eastern Europe.
It was thought that Belgium would be able to avoid such a rise by instead creating a new tax, Belgian 'Fairness Tax' on holding companies. Belgium has been struggling recently to reach its € deficit target of 3% of GDP.