ACV/CSC urges introduction of assets tax

Bruyninckx, Hans; van Mechelen, Natasha

Overview

Article

ACV/CSC urges introduction of assets tax

Published: 27 March 1999

Hans Bruyninckx,

Natasha van Mechelen

Social partners

In March 1999, the Confederation of Christian Trade Unions (Algemeen Christelijk Vakverbond/Confédération des Syndicats Chrétiens, ACV/CSC) launched a campaign, calling for the government to introduce a 1% tax on all assets exceeding BEF 15 million. It is calculated that the tax would raise about BEF 150 billion every year. The ACV/CSC wants to use this financial resource to support an active employment policy.

Belgium's ACV/CSC trade union confederation launched a campaign in March 1999 for the government to introduce a 1% tax on all assets exceeding BEF 15 million. The tax would raise about BEF 150 billion annually, which would be used to support an active employment policy. Belgium is currently the only EU country without any kind of capital gains tax.

In March 1999, the Confederation of Christian Trade Unions (Algemeen Christelijk Vakverbond/Confédération des Syndicats Chrétiens, ACV/CSC) launched a campaign, calling for the government to introduce a 1% tax on all assets exceeding BEF 15 million. It is calculated that the tax would raise about BEF 150 billion every year. The ACV/CSC wants to use this financial resource to support an active employment policy.

The idea for a tax on assets was launched during a study day organised for the union confederation's activists. It also signalled the start of an information campaign on property and assets taxes. The demand for the introduction of the tax is part of a general intention to create a more equitable fiscal system designed to generate sufficient financial means to allow for employment and social security policies. Income from capital has experienced a phenomenal growth over the last few years, by contrast with income from wages and benefits. The introduction of a tax on capital gains presents a chance to reverse this trend. Belgium is the only country in the European Union that does not currently have this type of tax.

Which assets are at stake?

The level of assets or wealth of Belgian people remains a well-kept secret. In addition, it is not always clear what should be understood or included, or how it can be measured. In general the assets consist of personal property, real estate, financial assets, personal debt and investments in other countries. A team of researchers at the Free University of Brussels has recently attempted to quantify and measure the assets of Belgian citizens, and ACV/CSC has used these figures as the basis for its proposals and campaign.

The research estimates that each Belgian household as a tax unit holds about BEF 9.6 million in assets, which amounts to about BEF 4.4 million per capita. Table 1 below outlines the distribution over the various deciles and demonstrates the unequal distribution of assets.

**Table 1. Assets of Belgian households (1997)**
Decile	% of total assets	Billion BEF	Per household (in thousand BEF)
1	1	439	959
2	1.9	834	1,823
3	2.7	1,185	2,590
4	3.5	1,536	3,357
5	4.4	1,931	4,221
6	5.6	2,458	5,372
7	7.9	3,468	7,578
8	9.2	4,038	8,825
9	14.6	6,409	14,005
10	49.6	21,772	47,580

Source: Free University of Brussels.

Households in the top decile (10) have average net assets of almost BEF 48 million and control in total about half of all the wealth. Almost 80% of the Belgian households (deciles 1 to 8) own less than the average amount of assets.

The fact that assets and incomes are unequally distributed has been known for a long time. However, during the 1980s and 1990s, the period of the so-called "recovery policy" in preparation for the Maastricht criteria to enter EU Economic and Monetary Union (EMU), inequality has increased even more. All extra tax burdens have been levied on income from labour (wages), whilst income from capital and assets has been kept largely out of the firing line. During the 1985-94 period, income from white-collar wages increased on average by 3% and income from blue-collar wages decreased by 0.4%, but profits increased by 136% and return on foreign investments by 81%.

One of the arguments often voiced against a tax on assets is that they are already subject to very high fiscal pressure. A comparison with a number of other countries demonstrates the opposite, however. Table 2 compares tax revenues from assets for a number of OECD countries.

**Table 2. Tax revenue from assets in OECD countries**
Country	Tax revenue from assets as % of Gross Domestic Product
Portugal	0.53
Italy	0.86
Greece	1.14
Germany	1.16
Belgium	1.21
Spain	1.30
Netherlands	1.73
Ireland	1.81
Denmark	2.16
France	2.18
USA	3.10
Canada	3.12
Japan	3.12
Luxembourg	3.52
Great Britain	4.59

Source: OECD.

Revenue from assets contributes very little to public finances in Belgium. Most of the contribution comes from death duties and registration taxes, which are often evaded and will be in any case reduced in Flanders in the future.

Arguments for a tax on assets

ACV/CSC is seeking a 1% tax on all assets worth above BEF 15 million. This would leave 80% of Belgian households unaffected. Given that the average level of assets of BEF 47.2 million and taking into account the threshold of BEF 15 million, this 1% tax would amount to an annual average of BEF 326,000 (1% of BEF 32.6 million) in tax on each household covered. This may seem like a large amount, but compared with the magnitude of the assets and their growth, it seems bearable to ACV/CSC.

ACV/CSC uses a number of economic arguments for the introduction of a tax on assets. If the revenue from this tax is used for social security, it would create some financial space to make "labour" cheaper and hence the economy relatively more labour intensive. Moreover, a number of more "liberal" studies have demonstrated that, of all types of taxes, one on assets has the least negative effects on the economy as a whole. A third important argument centres on the European harmonisation of taxes. Belgium is the only country in the EU that does not have a tax on the assets of private persons, nor on assets of companies nor on growth in assets. All other EU countries have some form of capital taxes. Belgium is a true "paradise for assets". Prime Minister Jean-Luc Dehaene has reacted to the ACV/CSC proposal by stating that he first has to wait for the debate at European level on this issue.

Besides economic reasons, there are a number of social issues involved for ACV/CSC: asset taxes contribute to a more equal distribution of wealth; play a role in reversing the trend towards greater inequality and might contribute to debt servicing; and hence free financial space for more public spending on social programmes.

ACV/CSC wishes to introduce the assets tax in two stages - first the establishment of an official assets registry, then the abolition of bankers' discretion. This should allow a clear picture of assets across the country and then the collection of the tax.

Commentary

It is obvious that the extremely unequal distribution of assets contributes to general inequality in Belgium. The fact that assets are hardly taxed has created a system that puts a large and disproportionate burden on those generating most of their income from labour. It is to the credit of ACV/CSC that it has linked this situation clearly with other problems such as unemployment, public debt and the financial future of the social security system. It remains to be seen, though, whether this attempt to bring the issue onto the political agenda will be successful. It is obvious that many people have a lot to lose from such a tax, and they are not exactly queuing up to declare their assets. (Hans Bruyninckx and Natasha van Mechelen, Steunpunt WAV)

Eurofound recommends citing this publication in the following way.

Eurofound (1999), ACV/CSC urges introduction of assets tax, article.