Moody’s the international ratings has praised efforts by the Belgian Government to reform their tax system, and said that strong corporate tax revenues combined with prudent fiscal policy have strengthened the nation’s creditworthiness.
Moody’s said in a report published on the 8th December that advanced corporate tax payments have been “exceptionally large” this year, while stronger economic growth has had a positive impact on general government revenue. As a result, the ratings agency believes a sharp fall in the budget deficit, from 2.6% of gross domestic product in 2016 to 1.3% this year.
Additionally, they said that tax reform would be “credit positive”, given that it is expected to help sustain economic growth.
The Belgian Government, in October 2017, approved tax reform legislation that will significantly decrease the rate of corporate tax and expand the tax base.
Under the new proposals, corporate tax, at present 33.99% together with the solidarity contribution, will be lowered to 29% in 2018, and to 25% in 2020. Additionally, the solidarity contribution will be phased out. The levy will be reduced from 3% to 2% next year, and to 0% in 2020.
The arrangement also includes cuts to corporate tax for small businesses, which will pay 20% income tax on the first €100,000.00 ($119,000.00) of income from 2018, instead of 25% tax under current rules. Nonetheless, small companies would have to pay one director renumeration of at least €45,000.00 per year in order to qualify for the reduced income tax.
The corporate tax rate reductions are to be balanced by limitations to the basket of deductions that companies can claim against income.
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