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2003 OECD Economic Surveys: Belgium 2003

image of OECD Economic Surveys: Belgium 2003

This 2003 edition of OECD's Economic Survey of Belgium examines recent economic developments, policies and prospects and  includes a special chapter on tax reform.

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Assessment and Recommendations

The main public policy priority in Belgium continues to be to implement structural reforms (tax reform and reform in labour and product markets) to increase potential growth. This has to be done in the context of reducing the large public debt. Debt reduction is necessary to respect the Maastricht Treaty, which calls for gross public debt to be reduced to less than 60 per cent of GDP, but more importantly to prepare for the future budget costs of population ageing. It is also necessary for substantially lowering the tax burden, which is one of the highest in the OECD. Taxation of labour incomes is particularly high, with adverse employment consequences for the low skilled. The employment record of older workers is also poor, with Belgium having one of the lowest employment ratios for workers aged 55-64 in the OECD. The government’s strategy for dealing with these challenges is to maintain fiscal policy settings that drive down public debt, to cut taxes, especially on low skilled labour, as budget margins become available and to reduce incentives for premature withdrawal from the labour force. It is to the government’s credit that it has continued to make progress on all of these fronts despite a weakening international economy and a complex institutional framework. Belgium’s economic challenges will be easier to meet insofar as tax and benefit reforms strengthen market incentives, and reforms in product and labour markets increase economic dynamism.

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