BRUSSELS: The International Monetary Fund (IMF) has recommended that Belgium could reduce its rate of corporate tax within a wider tax reform plan that should aim to remove distortions from the business tax system.
When the corporate tax surcharge is included in the corporate tax calculation, Belgium’s effective corporate tax is 33.99 percent, one of the highest in the world. However, the IMF said in its latest Article IV report for Belgium that it “sees merit” in a corporate tax cut if it forms part of a broad, revenue-neutral tax reform plan.
“The aim [of tax reform] should be to create a more level playing field across business and investment activities,” the IMF said. As part of this process, the IMF urged Belgium to review profit tax deductions; rules against tax avoidance; the taxation of capital gains; interest and dividend withholding taxes; the tax treatment of rental income and real estate; and tax preferences for savings accounts. Changes to the notional interest deduction could also be included in a corporate tax reform plan, the IMF said.
Until recently, the Belgian Government was planning to cut corporate tax to as low as 20 percent by 2020, a measure that would have been paid for by the removal of various corporate tax deductions. However, this plan was put on hold under a budget agreement reached between members of the country’s fractious coalition government in October 2016.
The IMF report also welcomed targeted personal income tax and social security contribution cuts planned for 2018-20. However, it urged the Government to prioritize further reductions in the tax “wedge” on labor, which remains the highest in the OECD.
