Belgium deputy PM seeks to tackle tax and pensions issues

Q: There has been economic growth in Belgium but it’s very modest. What is your outlook for the rest of 2016 and beyond?

A: We took some important measures last year and we are still working on others. First of all, we have decided on a tax shift, which is very important in lowering labour costs and stimulating purchasing power for consumers. That was instigated last year and the results in creating jobs are now ongoing. The national bank launched a study recently that showed the shift will create 140,000 jobs in the next year. Of course, our growth was a little modest and we had the terrorist attacks in March – but referring to the national bank again, it predicted that this year there will be a growth of 1.3% of gross domestic product, [later] growing to 1.6% in 2018.

The tax shift lowering the labour costs is very important. The second measure that we have taken is raising the pension age to reach 67 by 2030. And we are also discussing modernising our labour laws. This issue is very important to me as minister of economy and employment. We are on track – but it is step by step.

Q: Will you be unveiling any new economic initiatives in the coming months?

A: We have decided that there will be a discussion about the taxation of companies. The minister of finance agreed to introduce some new ideas about the taxation of companies and there will be a debate in September. Of course, for us it is very important to underline the stability of our tax legislation.

We have some very interesting instruments, such as the notional interest deduction – that’s certainly very important for international companies that are either coming to Belgium or are already there. We have an economy of small and medium-sized enterprises [SMEs] – that’s a reason why we are thinking about reforming our income tax for companies to stimulate SMEs. We now have a tax of 33% and for SMEs that is a huge tariff. But the minister of finance will introduce a discussion about reforming the taxation of companies in September.

The second element is how we can stimulate public investment. We have, at European level, the Juncker Fund approach [a fund used to kick-start investment spending in Europe and seed growth] and we are confident that some very important infrastructure works will come from it. Because our debt-to-GDP ratio is more than 100%, of course, we must be very careful of the European approach of budget constraints, that we stimulate public investments but stay on track because it’s still a federal government decision to have the budget balanced in 2018.

Q: Will the public accept to a great enough degree the measures you will need to put in place to meet such a target?

A: For the moment there are some very delicate discussions about the new pension regime. There are certainly some reactions from the unions, as well as some reaction to the modernisation of the labour law from the same unions. We must be careful because we are tackling a lot of problems. The first problem was the problem of the refugees. For Belgium it was a very important and very delicate issue, because of the terrorist attacks in March, which had unfairly been linked to each other.

Then we had a discussion regarding the control of the 2016 budget with measures for a total of €2bn. Now we have some reaction from the unions about the pension regime and the modernisation of the labour law. In July to September this year we start the 2017 budget, and of course to stay on track we must balance the budget in 2018. It will be a very important exercise for the government to find the right balance, because one of the issues we have in Belgium is fairness of taxation and the discussion about what the taxation is on income from capital, what the taxation is on labour income, and so on. Having a fair taxation regime is one of the political issues going on right now in Belgium. 

Kris Peeters is Belgium’s deputy prime minister and minister of economy and employment.