Belgium – Proposed 22% VAT rate

Belgium is currently debating a proposal to increase the standard VAT rate from 21% to 22%. The proposal is part of the broader reform of the federal government to balance its budget. Other changes under consideration include:

• Harmonising reduced VAT rate (currently 6% and 12%) into a single 9% rate,
• Expanding the 0% VAT scope to essential goods for example fresh fruits, vegetables, medicines, diapers and public transport,
• Strengthening VAT collection and closing VAT gaps by the introduction of e-invoicing and real time reporting.

A VAT increase by 1 percent is expected to generate substantial additional revenue for the Belgian treasury. For customers, this increase however means higher prices on goods and services subject to the standard VAT rate that will put additional pressure on the cost of living. Additionally, implementation of the VAT rate change requires updating systems for businesses, billing, accounting and tax filing, which puts additional burden on businesses that are now focusing on the introduction of electronic invoicing.

Therefore, although this change would generate significant revenue for the state, without accompanying measures like support for vulnerable households it risks being perceived regressive. The proposal has already caused a political crisis within the ruling coalition and the outcome will heavily depend on whether the governing coalition can reconcile fiscal necessity with social fairness.