Total government consumption is among the highest in
Europe, due to generous welfare and redistribution programs, reaching almost
54% of GDP in 2015. Continuous public deficits have substantially increased the
levels of public debt, to 106% of GDP. The ongoing fiscal consolidation gave
some results in curbing public expenditures growth, and fiscal deficits are now
in compliance with the Maastricht criteria. Public sector in Belgium is both
extensive and expensive, and almost a quarter of the overall population is
employed in the public sector. State owned enterprises (SOE) are mainly
concentrated in the fields considered as natural monopolies or utilities, such
as railway and postal systems, as well as telecommunications, which are even
now market leaders in their
industries. However, SOE management quality is dubious,
compared to best international practice (for example, the railway system is
divided into two regional enterprises, which incurs higher cost). The company
tax rate is among the highest in Europe, standing at 33,99%. Income tax has
very progressive rates: 25% being the minimum, and even 50% being the maximum.
VAT is set at two lower rates of 6% and 12%, while the ordinary rate is 21%.
Very high tax wedge which stood at 55.6% on average wage (the highest among
OECD countries) due to high social security contributions and personal income
tax was identified as one of the problems in line with fostering job creation.
Therefore, in October social security numbers paid by the employers was reduced
from 33% to 25%. The European Commission has recently concluded that tax
incentives provided by the Belgian government to 36 mostly big European
companies since 2005 were illegal, breaching EU state aid regulations.