Belgium will introduce a minimum tax rate of 15% on corporate profits from 1 January next year, in a move which policymakers hope will help curb the country's soaring fiscal deficit.
The levy, which closely follows the text agreed among 138 countries under the auspices of the OECD in July, will apply to the profits of all companies whose annual turnover exceeds €750 million.
The Federal Government estimates that the new measure will raise up to €634 million, or roughly 0.1% of annual GDP, in additional government revenue in 2024. This will provide a small but nevertheless welcome financial relief to the Belgian State, which is expected to run a total deficit of 4.9% next year – well above the forecast EU average of 2.8%.
'Largely toothless'
However, many experts have condemned the OECD bill for being insufficiently stringent. In the forward to a recent report by the EU Tax Observatory, Nobel Prize-winning economist Joseph Stiglitz wrote that the proposed minimum tax rate has been rendered "largely toothless by a series of loopholes and 'carveouts'".
The report itself went on to note that such loopholes have caused the expected additional global tax revenue to fall to 5%, just half of what was previously forecast. The report called for the loopholes to be eliminated and for the "far too low" 15% minimum rate to be increased to 25%.
Furthermore, the study found that the current subsidy race between world economies to attract green-energy producers, which was "triggered" by the US Inflation Reduction Act (IRA) in 2022, could "more than offset" any potential revenue gains from the new minimum tax.
"[Such a race] depletes government revenues, and if not accompanied by egalitarian measures, it risks increasing inequality by boosting the after-tax profits of shareholders, who tend to be towards the top of the income distribution," the report noted.
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In a previous study, the EU Tax Observatory estimated that average annual lost tax revenue across the EU over the period 2004-2016 was €46 billion, or roughly 0.46% of GDP. Belgium's lost government revenue was found to be slightly above the EU average, at 0.5% of GDP.
The minimum tax proposal follows soaring corporate profits across much of the Western world over the past year. According to a recent analysis by the European Trade Union Confederation (ETUC), real profits (which account for inflation) rose by 1.5% in the EU in 2023, despite average real wages having fallen by 0.7%.
Other recent studies by the International Monetary Fund (IMF) and the European Central Bank (ECB) have concluded that corporate earnings have not only dramatically increased over the past year, but are actually the principal cause of Europe's ongoing inflation crisis.
