BRUSSEL: International ratings agency Moody’s has praised efforts by the Belgian Government to reform the tax system, and said that strong corporate tax revenues combined with prudent fiscal policy have strengthened the nation’s creditworthiness.
Moody’s said in a report published on December 8 that advanced corporate tax payments have been “exceptionally large” this year, while stronger economic growth has had a favorable impact on general government revenue. As a result, the ratings agency expects a sharp fall in the budget deficit, from 2.6 percent of gross domestic product in 2016 to 1.3 percent this year.In addition, Moody’s said that tax reform would be “credit positive” given that it is likely to help sustain economic growth.Under the proposals, corporate tax, currently 33.99 percent including the solidarity contribution, will be lowered to 29 percent in 2018, and to 25 percent in 2020. In addition, the solidarity contribution will be phased out. The levy will be reduced from three percent to two percent next year, and to zero percent in 2020.
The agreement also includes cuts to corporate tax for small businesses, which will pay 20 percent income tax on the first EUR100,000 (USD119,000) of income from 2018, instead of 25 percent tax under current rules. However, small companies would have to pay one director remuneration of at least EUR45,000 per year in order to qualify for the reduced income tax.
The corporate tax rate reductions are to be offset by limitations to the basket of deductions that companies can claim against income.
