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A bird’s eye view on 20 years of tax-benefit reforms in Belgium

Listed author(s):
  • André Decoster
  • Sergio Perelman
  • Dieter Vandelannoote
  • Toon Vanheukelom
  • Gerlinde Verbist

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.

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File URL: https://lirias.kuleuven.be/bitstream/123456789/494657/3/DPS1507_.pdf
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Paper provided by KU Leuven, Faculty of Economics and Business, Department of Economics in its series Working Papers Department of Economics with number 494657.

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Date of creation: Apr 2015
Publication status: Published in CES - Discussion paper series, DPS15.07 pages:1-46
Handle: RePEc:ete:ceswps:494657
Contact details of provider: Web page: http://feb.kuleuven.be/Economics/

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