Despite recent progress, the high cost of labor in Belgium remains a persistent hurdle to economic growth and job creation. According to the OECD’s Taxing Wages 2018 report, Belgium is the only OECD country with a tax wedge above 50%.
Whether considering the ‘net personal average tax rate’ or the ‘tax wedge’, Belgium comfortably claims the top spot in the OECD’s league tables for the tax burden on labor.
The take-home pay for a single worker in Belgium is taxed at the highest rate across the OECD. As a percentage of gross earnings, a single Belgian worker pays 40.5% in income taxes and social security contributions, a full 15% more than the OECD average. This rate is improved when taking into account child benefits or married couples.
In turn, employers are faced with the daunting cost of doing business in the country. The tax burden on labor, including both personal income taxes and social security contributions, has a dramatic influence on the overall cost of hiring in Belgium. At 53.7%, Belgium’s tax wedge – the difference between total employment costs and workers’ take-home pay – towers above the OECD average of 35.9% and further exacerbates the competitive disadvantage of Belgium vis-à-vis its neighboring countries, with Germany (49.7%), France (47.6%), the Netherlands (37.5%) and Luxembourg (36.7%) all at a lower rate.
53.7% in Belgium vs. 35.9% OECD average.
— AmCham Belgium (@AmChamBE) April 27, 2018
Belgium’s strengths are diminished in the face of the high cost of labor in the country. Regardless of the sector, from R&D and innovation to logistics, high labor costs are an obstacle to attract and retain talent in Belgium and determinantal to economic growth in the country.
While AmCham Belgium applauds the Federal Government’s efforts to reduce labor costs – particularly the 2015 tax shift, which lowered employer social security contributions – more can be done. The Chamber looks forward to working in partnership with all levels of government to ensure that Belgium can improve its attractiveness as a business and investment destination.
Consult our 2017 Priorities for a Prosperous Belgium for the Chamber’s recommendations to tackle the high cost of labor and other labor market challenges.