A Belgian Eye – Episode 99

Our resident Belgian Philippe Persoons takes a look at life through a Belgian Eye.

Did you think that life is expensive in Belgium?

Hello and welcome on a Belgian Eye

Did you think that life is expensive in Belgium? Well, it certainly is not for the multinationals. We already knew we had the so called ‘Notional Interest Deduction, but there is more.

First of all, let me explain that ‘notional Interest Deduction, for I presume you don’t use it every day. The Notional Interest Deduction was invented 10 years ago, – happy birthday dear Notional Interest Deduction’ -, and it’s supposed to be an innovative Belgian tax incentive enabling all companies to deduct from their taxable income a fictitious interest calculated on the basis of their shareholder’s equity.

By doing so the tax discrimination between debt financing and equity financing is wiped out. In the case of loan capital, the interest paid is deductible from the taxable base, while with equity capital the dividends are taxable.

And that Notional Interest Deduction is the solution, it is the key tax trump card for attracting multinationals to our country. It is … Or at least it was. The notional Interest deduction is about an interest, fictitious as it may be, but equal to the common interests at this moment. And it’s a well-known fact that interests have melted, and so has the notional Interest.

Of course the Notional Interest Deduction was contested by extreme left parties. Centre-left was in government when the system was implemented and for that reason they kept their mouth shut during the following years.

Was the Notional Interest Deduction the only present we had to offer the rich multinationals? Well apparently not. No one had ever heard about it until Europe discovered it: the Excess Profit Tax Scheme.

The Excess Profit Tax Scheme gave important tax reductions to at least 35 companies, for the only reason that they are multinational.

EU Competition Commissioner Margrethe Vestager said Monday the tax advantage “distorts competition”. The companies didn’t have to pay taxes on more than 50 percent of their actual profits. Sometimes it even went as high as 90 percent, and this is unacceptable. Countries can’t give any company, however large, however powerful an unfair competitive advantage compared to others.

Belgium has now to recover the unpaid tax, about 700 million Euro, from the companies involved.

The Notional Interest Deduction, the Excess Profit Tax Scheme, I never heard about it in Belgian politics before and I never read about opposition of any kind against it either.

Then again, it’s probably one of the main reasons why more than half of my income goes to Belgium. I guess you understand why I prefer a European level when possible. Let play time be over and let good governance rule!

Have a nice income

Not too many taxes,

And have a nice day.