PM unveils plan to cut income tax

13 June 2005

BRUSSELS — A renewed proposal from Prime Minister Guy Verhofstadt to fund a cut in income tax by raising BTW levies on consumer goods sparked fevered media attention on Monday.

The prime minister’s proposal — first mooted three months ago — will form part of the federal government’s policy statement to be released in October. He wants to shift the burden of taxation from workers’ income to consumer goods.

The proposed increase in BTW tax (VAT in English) would not to be applied to labour intensive sectors such as the construction and the hotel and catering industries. Cheap imports from countries with cheap labour are the primary focus.

The Liberal VLD prime minister also wants to reduce labour costs, allocating to this purpose EUR 80 million to the social accord agreed on between the government, unions and employers.

A further EUR 200 million will be used to bring labour costs in line with neighbouring countries such as Germany, Flemish public broadcaster ‘VRT’ reported.

A mass information campaign will be launched in autumn to encourage foreign investment in Belgium and boost confidence in the Belgian economy.

The Flemish Socialist party SP.A reacted moderately positive to the proposal and is prepared to discuss the matter, while the Flemish Christian Democrat CD&V warned the BTW increase is a disguised tax hike.

The leader of the Francophone Socialists, Elio Di Rupo, demanded concrete proposals before launching into discussion. “And it must take people with a low income into account,” he said.

Self-employed branch organisation Unizo warned for negative consequences, pointing out that the current 21 percent BTW tax is already among the highest in Europe.

Distribution federation Fedis said higher consumer taxes were “incomprehensible in the current economic context”.

Subject: Belgian news