2023-10-14 02:00:50
The overall judgment on the 2024 budget is one of a certain frustration: the underlying orientations are the right ones, but it would have been possible to do more and better.
©Tim Dirven
Some might think that the “bedroom economists”, comfortably installed on the balcony, take pleasure in criticizing the action of governments, necessarily always subject to the constraints that realpolitik imposes. Let us be undeceived, there is more joy in praising than in blaming.
It has been a few days since the 2024 federal budget was presented to Parliament and the press. What do you think? The overall judgment is that ofsome frustrationsaying that it should have been possible to do more and better, and with a more transparent discourse, but that simultaneously the underlying directions are the right ones and that a comparison in terms of seriousness with the budgets of the federated entities, from the north, center and south, is frankly flattering for the federal level.
Why only banks?
Let’s start with this tax on big banks. Given the profits made thanks to the rise in ECB rates while the remuneration of savings accounts remains mediocre, no one is going to cry crocodile tears over a 150 million euro effort. At the very least, when the ECB/livret remuneration gap increases by 1.5 percentage points – and in reality, it is more – and this concerns 300 billion euros, that is an increase in income 4, 5 billion euros. In view, 150 million euros are crumbs! At the same time, the measure poses two fundamental problems.
No one is going to cry crocodile tears over a 150 million euro effort. But why only target banks? What justifies specific treatment?
First of all, why only target banks? What justifies specific treatment? Is Big Pharma more sympathetic and virtuous? Or the food sector, which is showing fairly dizzying price increases?
Secondly, why only target the big banks? We know that small savings banks that favor re-employment in fixed-rate mortgage loans and have not properly hedged themselves once morest the risk of rising rates are “inconvenienced in their surroundings” and we know that they can count on relays political and regulatory, but this does not make for an intellectually satisfactory justification!
Let’s stay in the banking sector, with the dividend of 220 million euros from Belfius. Here, you have to be strict, because it’s smoke. Of course, we must compensate for the loss of dividends from the National Bank, but when a 100% public company distributes a dividend to its shareholder, it is a white operation, “vestzak, broekzak” as we say nicely in Dutch. Including this type of operation as a budgetary measure is in no way new, but it remains to be deplored.
Likewise, it remains to be deplored the persistence of this Belgian budgetary surrealism which wants that alongside revenue measures and expenditure measures, there is a “other” category. Of course, the accounting rules applying to public authorities are idiotic, and invite us to multiply budgetary artifices, but we cannot be satisfied with responding to them with such stratagems.
Resume the dog’s mouth bone
The 6% VAT on certain demolition-construction operations is also interesting to comment on. First, it is known that indirect tax reductions are largely captured by intermediaries, a well-studied phenomenon, and far from being specific to Belgium. It is therefore a measure with a poor relationship between budgetary cost and economic and environmental impact. Of course, the construction sector was asking for it, but that doesn’t make it a good idea for the general interest. Then, we observe how great the pressure is for temporary measures to be sustained.
We hear voices rising once morest the non-extension of the generalized version of this measure which was decided in the context of a pandemic and announced as temporary. It’s a shame he’s so difficult “to take the bone from the dog’s mouth”because then this makes the adoption of one-off, countercyclical measures more problematic.
On environmental taxation, which must be increased, we cannot say that there is nothing in the budget, but we are largely left wanting, while there is “fire in the lake”.
Finally, the conditions attached to this measure make the happiness of bureaucracy. We exclude the promotion sector, phew, and we limit this to certain properties, notably in terms of maximum surface area, with conditions whose detail is worthy of Courteline. How to count common spaces, small rooms, those with low ceilings? We will have to measure and control! Where is the administrative simplification?
No to flexi-jobs
On the environmental taxationwhich must be increased, even if the trauma of ecotaxes remains alive at Ecolo, we cannot say that there is nothing in the budget, but we remain very hungrywhile there is “fire in the lake”.
And this observation also applies to the labor market. Lowering the cost of labor and increasing net income for low wages, we can only be in favor, but the chosen path is not the one we would like, namely a generalized change, “across the board”, linear, simple, readableeasy to implement.
Why are there differences in taxation depending on the sector? Is this not contrary to the principle of horizontal equity (“same contributory capacity, same tax”)? However, this is discrimination with flexi-jobs. How can we justify the fact that a teacher who has reached retirement age pays less tax than a person of the same age working in another sector? Yes for the gap in purchasing power between work and non-work to be greater, yes for social security contributions to be further reduced on low wages, but no to differentiation between sectorsand therefore no to flexi-jobs.
Stephen of Callataÿ
Co-founder and economist
Orkney Asset Management
1697347665
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