A Bird's Eye View on 20 Years of Tax-Benefit Reforms in Belgium

46 Pages Posted: 28 Apr 2015

See all articles by André Decoster

André Decoster

Department of Economics KU Leuven

Sergio Perelman

University of Liège - Department of Economics

Dieter Vandelannoote

University of Antwerp - Centrum voor Sociaal Beleid

Toon Vanheukelom

KU Leuven - Center for Economic Studies

Gerlinde Verbist

University of Antwerp

Date Written: April 2015

Abstract

Belgium has seen major changes in its tax-benefit system over the past twenty years. These changes have, to a large extent, co-determined the evolution of disposable incomes of Belgian households on one hand, and their incentives to work on the other. In this paper we assess equity and efficiency aspects of changes in tax-benefit policies over the full course of 1992-2012. By simulating effects of current and past tax-benefit policies using the microsimulation model MEFISTO-EUROMOD, we summarize the shifts in policy orientation over this period using two summary measures of redistribution and work incentives.

Our three main findings are: 1) the changes in the tax-benefit system have to a large extent been pro-poor, and redistribution has been increased; 2) the introduction of an earned income tax credit and the lowering of personal income taxes has contributed to improve work incentives, but this effect was partially eroded by an increase in unemployment benefits since 2000; 3) the results crucially depend on whether one chooses as ‘no policy change’ counterfactual indexation with inflation or indexation with nominal wage growth.

Keywords: Labour supply, Marginal Cost of Public Funds, Microsimulation, Redistribution, Taxation, Tax-Benefit system

JEL Classification: H21, H41, J20

Suggested Citation

Decoster, André and Perelman, Sergio and Vandelannoote, Dieter and Vanheukelom, Toon and Verbist, Gerlinde, A Bird's Eye View on 20 Years of Tax-Benefit Reforms in Belgium (April 2015). Available at SSRN: https://ssrn.com/abstract=2599970 or http://dx.doi.org/10.2139/ssrn.2599970

André Decoster (Contact Author)

Department of Economics KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://www.andredecoster.be

Sergio Perelman

University of Liège - Department of Economics ( email )

7 Boulevard du Rectorat
Batiment B31
4000 Liege
Belgium
+32 4 156 3098 (Phone)
+32 4 156 2958 (Fax)

Dieter Vandelannoote

University of Antwerp - Centrum voor Sociaal Beleid ( email )

Belgium

Toon Vanheukelom

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Gerlinde Verbist

University of Antwerp ( email )

Prinsstraat 13
Antwerp, Antwerp 2000
Belgium

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