As government efforts to reach an agreement on tax reform continue to falter, critics have blamed the "unacceptable" propositions regarding unemployment made by Prime Minister Alexander De Croo.
Last weekend saw the PM and Deputy Prime Ministers restart discussions of the long-planned fiscal reform after Finance Minister Vincent Van Peteghem (CD&V) proposed his latest amendments on Sunday.
The proposed reform had been expected to generate €6 billion but Van Peteghem’s latest revision significantly reduces the expected revenue, now just €2 billion after the minister proposed to scrap significant social security contributions.
Most notably, the so-called 'crisis contribution' would be dropped. Not only applied to energy companies during the pandemic, this tax has long been imposed on wealthier households to increase their social security contributions.
Van Peteghem's proposal to end the additional levy was met with disagreement from left-leaning parties in government, who wish instead to reduce the tax burden on the lower and middle classes.
Belgium's budget woes are well known and will play a crucial part in next year's elections. Credit: Orlando Whitehead
The major hold-up to the reform appears to be efforts by the liberal parties to tie the fiscal reform to an overhaul of the labour market; De Croo’s ideas on unemployment have come under severe criticism by the centre-left and greens in government.
Both Francophone and Flemish liberals are keen to reform Begium's labour laws. Both parties view this as a key part of the upcoming fiscal reform as well as their election campaigns next year.
Teetering on the electoral abyss
Acutely aware of his Open VLD party’s poor performance in recent polls, the Prime Minister tabled eight government proposals that aim to reduce State expenditure on the country’s unemployed.
De Croo's measures include removing unemployment benefits from the long-term unemployed who refuse job training, as well as reducing the number of sick days for employees and easing access to "flexi-jobs".
His proposals were branded "unacceptable" by the left-wing parties in government, with some sources from the Francophone Socialist Party PS describing them as "a declaration of war."
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De Croo’s unemployment proposals have held up the tax reform with it now seeming unlikely that the government will reach an agreement before the parliament goes into recess on 20 July.
More likely is that the Belgian Government will look to reach an agreement on fiscal reform by the autumn, linking its future with the upcoming federal budget for 2024.
