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Belgian budget trimmed via minor cuts

12:11 02/07/2013

Belgium said it would trim €750m from its budget through minor cuts across a broad swathe of areas of government and social security, as it responded to warnings from the European Union over its deficit, writes the Wall Street Journal’s Frances Robinson. "We see austerity measures in several countries which are leading to traumatic events; we didn't want Belgium to sleepwalk into austerity," Prime Minister Elio Di Rupo said yesterday. "We took time because we didn't want to just take the easy route of taxing things left, right and centre." Instead, two-thirds of the measures, which will trim €750m off this year's budget and €2.374bn off next year's, will come mainly from the minor cuts. No new taxes have been raised on workers. Taxes on banks will be increased. The measures are significant because the country had been threatened with fines for its budget deficit, which exceeded the EU limit of 3% of GDP in 2012. The EU said the country must get this down to 2.7% of GDP in 2013, including 1% of permanent changes each year. Finance minister Koen Geens has also introduced a new "fairness tax" which will apply a minimum tax level to dividends paid by companies that are based in Belgium to take advantage of comparatively lower taxes. The new tax is expected to bring in €140m this year. In addition, foreign diplomats in Brussels will have to pay more value-added tax, having previously been exempt. For example, diplomats had been able to buy 10,000 cigarettes value-added tax free; this will be cut to 5,000 next year and none at all in 2015. "These measures will enable our country to definitively leave the EU special procedures and we've even drawn up the preliminaries for a very strict budget in 2014, we've done more than 80% of the work," Di Rupo said. Belgium will hold a general election next year. the last one saw the country being run by a caretaker government for 18 months.

Written by The Bulletin