Total government consumption in Belgium is among the highest in Europe, due to generous welfare and redistribution programs, standing at 52% of GDP in 2017. The long history of budget deficits has led to a very high public debt, reaching 103% of GDP in 2017. But, it has recently been put on a slow downward trajectory. However, it will take years for Belgium to reach Maastricht public debt criterion of 60% of GDP. Economic growth, based on rising private consumption and exports, reached 1.7% and is expected to pick up. Budget deficit has been halved, from 2.5% to 1.1% of GDP. There are strong fiscal pressures stemming from demographic changes, which encouraged the government to introduce the very first pension system change since 1956, by increasing the retirement age from 65 to 67
(although in steps, until 2030). Public sector in Belgium is overwhelming, since it employs almost a quarter of the overall population. State owned enterprises (SOE) are mainly concentrated in the fields considered as natural monopolies, such as utilities, railways, and postal system and telecommunications. Although they comply with the business regulation, there have been reports on unfair competition by these former monopolies. The quality of SOE management is dubious as compared to the best international practices in OECD. There are plans for minority equity privatization of the state bank Belfius, while the telecom company Proximus remains in state ownership. High expenses need high tax rates, thus the income tax is very much progressive: 25% for the low earners and even 50% for the highest earners, whereby there are also communal income taxes, of 7% on average. General VAT rate is 21%, while two preferential rates are 12% and 6%. Very high tax wedge, which stood at 54% on an average wage (the highest among OECD countries), has been reduced by decreasing the social security contributions paid by employers in order to make workforce more competitive. There was also a big change in corporate income tax in July 2017, with the rate being decreased from 33.99% to 25%. That is expected to support new investments.