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With this tweet in the early hours of July 23, Prime Minister Michel announced that his Government had reached an agreement on the budget for 2015 and 2016 and on a “tax shift” of €7.2 billion.  The government had to find an additional € 978 million to balance the budget for this year and to reduce the deficit to 2.5 percent as promised to Europe. An additional € 800 million will be needed for 2016, and the government has the intention to get the budget in balance by 2018.

Tax shift

The buzz phrase in Belgian politics for the last months has been “tax shift”. The tax burden is to be shifted away from a tax on labor, the question was how, how much and to where.

PM Michel wanted to find an agreement before the Belgian National Day, but he had to ask his ministers to postpone their holidays until the agreement was found on a tax shift and a correction of the budget of €782 million.  The government wants to gradually reduce the social security charges and increase individuals’ purchasing power. By 2018, it should have shifted about € 7.2 billion euros to other taxes. How does it plan to do that?

In the first place, the government will bring the labour cost down to the level of the neighbouring countries to make Belgian companies more competitive.

The government also wants to increase the purchasing power of the citizens.

Where will the money for the tax shift of €7.2 billion come from? The following is a (provisional) overview.

These mesures will now be implemented over the coming months to enter into force at the latest in 2016. However, it is anticipated that there will be new tax measures in 2017 and 2018 to pay for the tax shift.  

Another tax amnesty

One of the remarkable measures announced is that there will be a new possibility to regularise undeclared capital and income in the form of a permanent regularisation procedure. Under the previous government, it had been decided that the permanent regularisation procedure would end in 2013 and that it would not be possible to regularise income anymore.

The current government is coming back on that and hopes to raise 250 million euros per year starting in 2017.  The timing coincides with the new rules on international exchange of data on bank accounts. Moreover, Prime Minister Michel threatens to deny tax dodgers their citizen rights, including the right to vote.

The powerpoint presentation during the press conference can be found here.