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Belgium needs to shift tax burden: OECD

Xinhua, February 5, 2015 Adjust font size:

Belgium has been told it needs to shift the tax burden onto the country's highest earners while slashing public service expenditure in order to maintain a higher level of growth, a new report said on Wednesday.

The report by the Paris-based Organisation for Economic Co-operation and Development (OECD), said that structural reforms were needed to back-up recent gains made in economic growth.

The report was presented to Belgian Prime Minister Charles Michel by OECD Secretary-General Angel Gurria in Brussels on Wednesday.

In addition, the report also advised implementing a lower minimum wage on young people, as well as raising the retirement age and closing-off avenues to early retirement.

According the report, public debt in Belgium is now 100 percent of the country's gross domestic product (GDP), and that fiscal consolidation is needed to ensure stable public finances.

The OECD said that the Belgium revenue system relies too heavily on personal income taxes and revenue from social contributions.

The OECD report comes after the European Commission has said that it will widen its investigation into certain EU tax dealings to include some corporate tax arrangements within Belgium.

European Commissioner for Competition Margrethe Vestager said at a press conference in Brussels on Tuesday that if proved to be correct, these arrangements would be a "serious distortion of competition benefiting a selected number of multinationals. As part of our efforts to ensure that all companies pay their fair share of tax, we have to investigate this further."

Wednesday's report by the OECD reinforced the need for a shift away from a system based on taxation of labor towards one based on taxation of consumption and the environment. The report also recommends a higher taxation on capital gains.

Presenting the report, Gurria said, "Belgium is one of the few euro area countries where GDP has already surpassed pre-crisis levels. Remarkably, despite the crisis, well-being remains high and income inequality is still relatively low. While these are commendable results, there is no room for complacency, as important challenges to growth and equity remain."

Meanwhile, Michel said that the OECD report was "an encouragement to the Belgian Government and confirms the soundness of our economic and social strategy. This encourages us to continue working on the cost of labor, because it is the only way to ensure the maintenance of social protection."

Michel said that there are "many possible measures" available to deal with economic growth in the country, and that the OECD report will be "addressed" by the government. Endit