Optimal housing taxation Belgium compared Marietta Haffner Sien
Optimal housing taxation: Belgium compared Marietta Haffner & Sien Winters ENHR conference, 2 July 2014, Edinburgh www. steunpuntwonen. be
Content • • • Why Belgium? Typology of housing taxation Optimal taxation according to Mirrlees Review Optimal and actual taxation compared: 5 countries Options for Flanders Discussion 3 -3 -2021 Optimal housing taxation 2
Focus on Belgium • • Federal state since the 1980 s Administrative Regions: Flanders, Brussels, Walloon Provinces Housing policy is regional, BUT – Tax policy is shared across government levels • National: income tax and VAT • Regional: property tax, transfer tax, inheritance tax (2002) – As of 1 January 2015 the favorable tax treatment of owner-occupied dwellings in income tax will be devolved to the regions 3 -3 -2021 Optimal housing taxation 3
Typology of housing taxation Once-only • Transaction tax • Consumption tax (VAT) Periodic • Personal income tax (corporate income tax) • Property tax 3 -3 -2021 Optimal housing taxation 4
Optimal taxation according to Mirrlees Review To design “a progressive, neutral tax system”: • No transaction taxes • A largely uniform VAT with a broad tax base • “Income from all sources should be taxed according to the same rate schedule … – all costs of generating that income to be deducted” – RRA exempts risk-free normal rate of return from taxation • Nothing on property taxation 3 -3 -2021 Optimal housing taxation 5
Optimal and actual housing tax compared OPTIMAL Owner-occupier Transfer tax No transfer tax VAT Broad-based VAT Property tax Not mentioned Income tax Income from all sources – ACTUAL Owner-occupier Tenant Transfer tax Existing dwellings All dwellings B NL DK? G UK – VAT New construction Standard rate, but… Exemption 0% rate B NL DK D UK – Property tax Owner B DK G NL Occupier Deduction for vulnerable hh B UK Income tax Investment DK NL Consumption D UK B approach? 3 -3 -2021 Landlord - person Tenant UK: annual levy on housing Landlord – person Imputed B NL Actual DK NL G UK Cost deduction for maintenance G Optimal housing taxation 6
Options for Flanders 2015 – starting point • Income tax base and tax rate will remain federal • Competence for tax deductions for owneroccupied dwellings transferred to regions • Accompanied with transfer of federal budget for 2014 • After that deficits expected because of new entrants and indexation a window of opportunity 3 -3 -2021 Optimal housing taxation 7
Options for Flanders 2015 • Lower one of the highest transaction taxes in EU • Income tax: – Include owner-occupied dwellings in taxation again – replace current tax base (also for rental dwellings) with market rents – allow cost deduction – abolish Woonbonus and its (less favorable) counterpart for private rented dwellings To reach more tenure-neutrality • Local tax as income tax or property tax? • Reconsider reduced VAT tax: – For renovation (6%): replace by well targeted subsidies, e. g. stimulating energy-saving investment – For social housing (6 -12%): integrate in social housing finance system 3 -3 -2021 Optimal housing taxation 8
Discussion • Since 25 May negotiations for new government • Strong consensus among political parties not to change the current system – – – • very weak willingness of population to pay more taxes Setting imputed rent at market rates will affect majority of households Increasing VAT to standard rate will provoke reactions from building industry Path dependency and lack of planning culture in Flanders (De Decker, 2014) Lack of knowledge on effects and distribution of benefits Setting imputed rent at market rates is federal competence, while income would accrue to regions Possible? • Lowering of transaction taxes: loss of revenue • Counterbalance by gradual increase of property taxes • Woonbonus may be cut-back because of budgetary problems Ø Few signs that momentum will be used 3 -3 -2021 Optimal housing taxation 9
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