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Growth-Enhancing Corporate Tax Reform in Belgium

Author

Listed:
  • Mooij Ruud De
  • Hebous Shafik

    (International Monetary Fund, Olympia, United States)

  • Hrdinkova Milena

    (Ministry of Finance in the Czech Republic, Prague, Czech Republic)

Abstract

Until 2018, Belgium had a unique corporate income tax system due to its notional interest deduction, also known in public finance literature as the allowance for corporate equity. At the same time, it had one of the highest corporate tax rates in Europe at 34 percent. The latter came under severe pressure to reform and, as of 2018, the government has started to reduce the rate, gradually to reach 25 percent in 2020. The reduction is accompanied by other measures, including a limitation of the notional interest deduction. This paper argues that the lower CIT rate is likely to be conducive to economic growth. Yet, the effects on growth would have been more favorable if the notional interest deduction would have been strengthened, rather than diminished.

Suggested Citation

  • Mooij Ruud De & Hebous Shafik & Hrdinkova Milena, 2018. "Growth-Enhancing Corporate Tax Reform in Belgium," Nordic Tax Journal, Sciendo, vol. 2018(1), pages 1-17, January.
  • Handle: RePEc:vrs:notajo:v:2018:y:2018:i:1:p:1-17:n:4
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    File URL: https://www.degruyter.com/view/j/ntaxj.2018.2018.issue-1/ntaxj-2018-0004/ntaxj-2018-0004.xml?format=INT
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    Cited by:

    1. Shafik Hebous & Alexander D Klemm, 2018. "A Destination-Based Allowance for Corporate Equity," IMF Working Papers 18/239, International Monetary Fund.

    More about this item

    Keywords

    H25; H32; H71;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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