The redistributive character of taxes and social security contributions
The article aims to explain the redistributive character of taxes and social security contributions in Belgium, and to demonstrate the mechanisms behind that redistribution. Compared to the other EU-15 countries, Belgium has less primary income inequality. Moreover, there is a relatively high degree of redistribution in Belgium, so that – after taxes, social benefits and social security contributions – the disparities are among the smallest in Europe. As in other countries, this income redistribution is effected primarily via social benefits. However, redistribution via taxation on income also plays a very important role. The most strongly redistributive tax in Belgium is personal income tax, which is highly progressive. That is due principally to the structure of the tax scales and the amount of the tax allowance, and to the reduction in taxes on replacement incomes. The influence of social security contributions on the redistribution of income is relatively slight, although it is greater than in the majority of the EU-15 countries. VAT, which accounts for the bulk of indirect taxes, is slightly progressive in relation to expenditure, owing to the rate structure whereby the reduced rate and the zero rate apply to goods and services which are consumed to a proportionally greater extent by low-income households. Conversely, in relation to disposable income, VAT is degressive. That is because the savings ratio increases with each income decile. Excise duties are degressive, in relation to both household spending and household income. This study also illustrates the fact that tax measures are seldom neutral in their effect on income redistribution. However, this effect is clearly dependent on the practical aspects of this type of measures. The personal income tax reform approved in 2001 and the introduction of the work bonus increased the progressive effect of the compulsory levies on earned income and reduced the average rate of the levy. While the impact of increases in excise duties on fuel is more mixed in terms of redistribution, the recent increases in excise duty on tobacco have accentuated their degressive character.
Volume (Year): (2006)
Issue (Month): i (June)
|Contact details of provider:|| Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles|
Phone: (+ 32) (0) 2 221 25 34
Fax: (+ 32) (0) 2 221 31 62
Web page: https://www.nbb.be/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, Daniela & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2005.
"Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits,"
IZA Discussion Papers
1824, Institute for the Study of Labor (IZA).
- Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, Daniela & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2006. "Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits," Economics Series 184, Institute for Advanced Studies.
- Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, D. & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2005. "Household incomes and redistribution in the European Union: quantifying the equalising properties of taxes and benefits," EUROMOD Working Papers EM9/05, EUROMOD at the Institute for Social and Economic Research.
- Verbist, Gerlinde, 2005. "Replacement incomes and taxes: a distributional analysis for the EU-15 countries," EUROMOD Working Papers EM2/05, EUROMOD at the Institute for Social and Economic Research.
- Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
- Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494.
- Verbist, Gerlinde, 2004. "Redistributive effect and progressivity of taxes: an international comparison across the EU using EUROMOD," EUROMOD Working Papers EM5/04, EUROMOD at the Institute for Social and Economic Research.
- Cathal O'Donoghue & Massimo Baldini, 2004. "Modelling the Redistributive Impact of Indirect Taxes in Europe: An Application of EUROMOD," Working Papers 0077, National University of Ireland Galway, Department of Economics, revised 2004.
- O'Donoghue, Cathal & Baldini, Massimo & Mantovani, Daniela, 2004. "Modelling the redistributive impact of indirect taxes in Europe: an application of EUROMOD," EUROMOD Working Papers EM7/01, EUROMOD at the Institute for Social and Economic Research.
- Bea Cantillon & Brigit Kerstens & Gerlinde Verbist, 2003. "Les effets redistributifs de la réforme de l'impôt des personnes physiques: résultats de microsimulation," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 46(1), pages 71-98. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbb:ecrart:y:2006:m:june:i:i:p:65-82. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.