NDLI: How to reform the tax system to enhance economic growth

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OECD Economic Surveys: Belgium 2009

Cover and Table of contents

Assessment and recommendations

Coping with the crisis while pursuing structural reforms

Securing fiscal sustainability during the economic downturn and beyond

Improving fiscal federalism

How to reform the tax system to enhance economic growth

Promoting competition to strengthen economic growth

How to reform the tax system to enhance economic growth

Content Provider	OECD iLibrary
Organization	OECD
Abstract	Individual elements in tax systems affect the growth process through different channels and to a varying degree. Consumption taxes are among the least distortive for growth, and there is considerable scope to increase the reliance on this tax source in Belgium. Differential taxation of saving vehicles distorts investment decisions, hampering the reallocation of capital towards its most productive use. However, the most distortive taxes are on labour through their effects on workers’ labour market decisions. Recognising the latter, the Belgian authorities have aimed at reducing taxation on labour. However, its level remains internationally high, reflecting numerous exemptions, which reduce tax bases and thus require higher tax rates than otherwise. To promote labour market prospects for individual groups on the labour market, wage subsidies and social security contribution reductions have been used extensively, leading to a complex system, often poorly targeted and at times subject to conflicting objectives. The end result is that the interaction between the personal income tax, the social security contributions, and the generous benefit systems has created a multitude of labour market traps which hold back employment. New tax reforms are constrained by the large and growing fiscal sustainability problem, implying that, unless substantial expenditure cuts are implemented, new tax reforms must be self-financed. This can be achieved by shifting the reliance of the tax system towards the least distortive sources and by broadening tax bases to allow lower tax rates.
Page Count	36
Starting Page	81
Ending Page	112
Language	English
Publisher	OECD Publishing
Publisher Date	2009-07-08
Access Restriction	Open
Subject Keyword	Economics
Content Type	Text
Resource Type	Chapter

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