2020 PPB Taxation

A best-in-class taxation system is more than tax rates

Luc Dhont, Chair of AmCham Belgium’s Legal & Taxation Committee

A country’s corporate tax system is often a decisive factor in business investment decisions. The previous Federal Government reduced the corporate income tax rate to 25%, and we are encouraged by the De Croo Government’s decision not to reverse the tax shift. However, more needs to be done for Belgium to effectively compete for foreign investment – and not only on tax rates.

In these uncertain times, the international business community expects a strong response to the economic damage caused by the COVID-19 pandemic. Businesses that were, and are still strongly hit by the crisis, should benefit from tax policies that encourage them to rebuild their economic footprint. International companies are part of the solution and can be the accelerator for economic growth. Policymakers need to offer a competitive and business-friendly tax environment. Important measures with zero or limited impact on the budget include stable tax rules, fair treatment when applying tax legislation and the simplicity of tax compliance.

Businesses (as well as citizens) have the right to claim a well-performing public administration. Over recent months, the members of AmCham Belgium’s Legal & Taxation Committee have shared their concerns about harmful practices in tax audits. Members point to an overly strict and even aggressive application of tax regulations and a lack of trust not only between tax authorities and taxpayers, but also between different government departments. Mutual trust between authorities and businesses should be a cornerstone of the tax system, and this comes without a (budgetary) cost.

Of course, a best-in-class taxation of labor, company profits and capital are also key building blocks for a prosperous Belgium. The main priority for the new Federal Government should be to reduce labor costs by re-introducing a cap on employer social security contributions. Belgium is one of the few countries in Europe without such a cap in place – which means social charges increase, without limit, in proportion to the salary. If Belgium wants to attract and retain corporate headquarters and decision centers, it will need to strengthen the incentives for senior management and other high-profile, internationally mobile positions.

The fundamentals of corporate taxation as we know it today are outdated, and we are convinced that fair taxation can only be achieved through the implementation of new globally agreed standards, which reflect the changes in society and business. New tax measures and principles should, in general, take into consideration trends like digitization as well as our societal objective to green the economy.

To help Belgium recover from the COVID-19 crisis and become more competitive, in AmCham Belgium’s 2020 Priorities for a Prosperous Belgium, we call on the Belgian Government to create a best-in-class corporate tax system. This is about more than tax rates: trust, stability and future orientation are also important factors for companies looking to invest. Labor taxes remain a particular sore point, requiring urgent attention, but there are also many non-fiscal measures which the government could implement to improve the tax environment in Belgium.

AmCham Belgium recommends

To invest in trust, stability and business-friendly incentives

  • Create a stable tax environment by not introducing new taxes, decreasing taxes and by simplifying tax legislation (conform national and international legislation) in a spirit of cooperation.
  • Adjust the tax framework to today’s realities by following international taxation standards and by embracing automatization in business and administration processes.
  • Reduce the cost of labor by increasing flexibility, granting tax-friendly incentives to highly skilled employees and by re-introducing a cap on employer social security contributions.