Une flat tax en Belgique ? Quelques éclairages sur les principes et les conséquences d'une telle réforme

In this paper we analyse what should be the effects of the introduction of a flat rate tax in Belgium. According to the principles of a flat rate tax system, allowances, credits and exemptions that are considered as tax expenditures are repealed and the progressive tax schedule is replaced by a single marginal tax rate that applies above a zero-rate bracket. There is no deduction for savings and tax credits for children stay in place. The reform is budgetary neutral. We first run a micro-simulation model for personal income taxation. This means that the final withholding tax on income from savings and the corporate income tax rate remain unchanged. The results indicate strong adverse effects on income distribution. In a second stage, we use out-of-model statistical information to simulate the effects of a full flat rate system in which the top marginal PIT rate, the final withholding tax on interests and the CIT rate are equalised. Base broadening also applies to the taxation of savings and to corporate income tax. The strong adverse effect on income distribution remains but in addition to this, the tax burden is shifted from income subject to PIT to income from savings. On the efficiency side, high-income earners enjoy the largest cuts while the drop in average income tax rates for low-income earners may result in a positive participation effect. Taxation of savings is more neutral under the contemplated tax reform. JEL codes: H20, H21, H23, H24, H25.