BRUSSELS (Reuters) — Belgium's government announced plans on Thursday to reduce employers' wage costs and income tax by 7.2 billion euros (US$7.9 billion) in a bid to boost Belgian competitiveness and end its status as the country with the highest burden on labour.
According to data from the OECD group of developed countries, Belgium has by far the highest wage taxes for single earners, which economists say hinders job creation as it is cheaper to employ workers in neighbouring countries.
Under the plan, the government will cut both income tax and taxes imposed on employers.
It said it aimed to recoup the money from raising the value-added tax rate on electricity and other items, increasing duties on diesel, introducing a tax on unhealthy products, such as soft drinks, and a financial speculation tax.
"If you look at our neighbours such as Germany, where wage costs are increasing, we are closing the gap twice as fast by doing the opposite," said Deputy Prime Minister Jan Jambon.
Take-home pay for those on lower and middle incomes would increase by about 100 euros (US$110) per month from 2016 onwards because of these measures, the government said.
Employer organisation VOKA welcomed the measures, which will need parliamentary approval, as good for growth and jobs, some tax experts said they would do little to remove Belgium from the top spot on OECD's tax charts.
"From the start there were too many taboos, such as ending tax benefits on second homes, company cars and savings accounts," said Michel Maus, a tax professor at Brussels and Antwerp universities.
"Are we going to drop down the ranks in those charts because of the announced measures? I fear not," he added. (US$1 = 0.9100 euros)