As part of a future revision of the tax code, the High Council of Finance (HCF) of Belgium in its Fiscal and Parafiscal Section is looking for ways to increase revenues and finance tax cuts affecting labour.
The Fiscal and Parafiscal Section of the HCF released a a 57-page in July 2021 presenting several calculations each presenting a different scenario with specific tax modifications.
The Section believes that the budgetary cost of the baseline scenario can be partially recovered by introducing environmental and climate taxes. In its opinion of May 2020, the Section had already pointed out that the absence of excise duty on kerosene for the aviation sector and the absence of VAT on the sale of airline tickets are not justified on economic or social grounds, let alone on environmental grounds.
The Section believes that unilateral initiatives would harm the competitive position of the Belgian aviation sector. This objection does not apply to the introduction of a boarding tax, as this already exists in several neighboring countries.
The increase of the excise duty on jet fuel equivalent to diesel and gasoline would bring in 1.15 billion euros per year to the State coffers. A VAT of 6% on plane tickets would allow Belgium to garner 202 million euros per year.
The HCF is also proposing a boarding tax on air travel of 10 euros per plane ticket for departures (transfer and transit included), with an estimated revenue of 142 million euros for the State. In total, the aviation sector could thus contribute 1.5 billion euros to the State budget of Belgium.
The Section believes that an increase in the currently very low excise duties on heating oil and natural gas is justified in order to comply with the commitments made at the Paris climate conference. Such an increase has two consequences that deserve attention:
- Through the indexation mechanisms, an increase in labor costs and/or a reduction in the margins allowed by the wage law;
- A decrease in the purchasing power of many low-income families who spend relatively more on excise and fuel oil than the weight of these products in the health index.
These consequences can be neutralized by using part of the revenue from the increase in excise duties to reduce employers’ social security contributions, to compensate for indexation for the lowest incomes and – in collaboration with the Regions – to take selective measures to encourage insulation work in homes. Where appropriate, these uses will limit the scope for using the revenues generated to reduce other charges on labour.
