In recent months, with inflation currently reaching more than 9% in our country, salary indexations have followed one another. Faced with this exceptional situation, Jean, retired, asks himself a question: are the tax scales indexed in the same way? Indeed, without indexation of tax scales, and with a significant increase in wages, the taxes of some households might also be increased.
Jean is retired, and lives happy days near Eupen, in the German-speaking region of the country. “Everything is going well“, he assures us from the outset, in this period of economic crisis. “I’m an owner, I’ve been an executive all my life, I’m quite comfortable“. However, a question torments him, to the point of pushing the orange button Alert us on our site. “I live very well, but I ask myself the question for the community. Incomes will be indexed, it is true, but if the tax scales are not, the State will probably take back with one hand what we are given with the other.“
“Some are going to have surprises”
Jean therefore wonders if the tax scales are indexed like salaries in Belgium. “I think it’s good that wages are indexed, it’s an advantage compared to neighboring countries, and it protects the purchasing power of citizens.” Which does not prevent the retiree from specifying: “That said, indexation mainly benefits people with high salaries, while workers who receive a high salary often benefit from a company car and/or a fuel card. This situation, given the current economic context and the gloomy prospects, is also likely to increase social inequalities.
Jean fears that the tax scales do not keep pace with salary indexation. “If we do not index the tax scales, some will have surprises. I have the impression that we never think regarding it. And given the indexations still planned, we must be able to anticipate.” Indeed, for salaries indexed only once a year (this is the case in the Joint Commission 200, for example), this indexation should reach 10%, according to an estimate by the human resources company SD Worx. For wages indexed each time the pivot index is exceeded (predefined price threshold for goods and services), several increases have already taken place, and others (around 2%) are still planned for the next few months.
In other words: if you earn €2,200 gross instead of €2,000 thanks to wage indexation, but you move into a more taxed tax bracket (basically: the more you earn, the more the tax % increases on the tax brackets high), you may not hit much more net. Jean’s question is as follows: are the tax thresholds for salary brackets also indexed? If this is not the case, we are all going to be taxed more, because the more we earn, the higher the slices of our salaries are taxed.
Indexation, yes, but nothing to do with that of wages
To answer Jean’s question, we contact the Federal Public Service Finance (FPS Finances). According to spokeswoman Florence Angelici, the tax schedules are effectively indexed each year, “but this indexation is not linked to the automatic indexation of salaries. Each scale is indexed, by tax bracket.
For the 2022 tax year, there is therefore no change. Unlike the indexation of salaries, the indexation of scales is calculated only once a year. This calculation is made according to theresult of the division of the average of the price indices of 2021 (112.26), by the average of the price indices of 1988 (57.93)“, according to information from the FPS Finances.”There are different calculations with different coefficients according to each tax bracket“, specifies the spokesperson of the SPF, for the technical details.
Currently, the portion of income exempt from tax is 9,750 euros (annual income). This means that below 9,750 euros, your income is not taxed. This is the first tax bracket. To compare: in 1992, this threshold was equivalent to 5,705 euros. This difference in amount is therefore the result of the indexation of tax scales since 1992. For the last installment, the threshold has even doubled in 30 years, from 24,800 to 43,370 euros. This means that for the 2023 tax year on 2022 income, income above 42,370 euros will be taxed at 50%.
Here is the detail of the evolution of the different scales (in euros):
source : SPF Finances
Bad news for taxpayers?
This may sound very complex, and it is! But remember that wages do not increase at the same rate as tax rates. According to the FPS Finances, it is very difficult to calculate the losses or gains for each taxpayer, as the situations are so different. For example, depending on your dependent children, you are entitled to certain tax exemptions. If you are a homeowner, or have taken out a bank loan, your situation is also very different from someone who has no exemption. Thus, each household is likely to receive a “good” or a “bad” surprise.
That said, when you exceed a scale threshold, only the amount that exceeds this threshold is taxed at the predefined tax rate. Here is an example :
- You earn 29,000 euros per year. 9,750 euros will not be taxed. Your income between 9,750 and 13,870 euros will be taxed at 25%. Your income between 13,870 and 23,120 euros will be taxed at 40%. Finally, the last portion of your income, between 23,120 and 29,000 euros (corresponding to your income), is taxed at 45%.
The more we earn, the more we pay
To understand even better, we contact a tax lawyer: Typhanie Afschrift. According to this professor from the Free University of Brussels, this fiscal year will still be special. “The problem here is inflation., explains the lawyer. “Wage indexations have followed more quickly, and this has a negative impact for the taxpayer.” Typhanie Afschrift refers to tax rates, as in the calculation above: “The more you earn, the more you pay a high rate. If you earn more because of indexation, you find yourself in a higher bracket and you pay more taxes, since indexation only catches up with the cost of living .”
This imbalance is then corrected with the indexation of tax scales. “But this one does not take place until the following year“, specifies the lawyer.In the meantime: the taxpayer loses and the State gains.”
The citizen can only suffer
Thibault Bouvier, another tax lawyer, confirms that the current situation may not be favorable to the taxpayer. “Today you pay taxes on the basis of scales which are not indexed“, summarizes the specialist. “Individuals have no way of anticipating this problem. The citizen can only suffer.“
The intuition of Jean, our retiree, is therefore good: this delay between the indexation of salaries and that of the scales might increase the taxes of certain households, and this will depend on each tax situation. For Thibault Bouvier, the responsibility for the problem lies with the State. “It is up to the state to lower the tax rate to avoid the problem. Tax scales and brackets are no longer relevant today. And the tax exempt amount [9.750€, NDLR] is too low.“
For the time being, no general change in the tax scales is envisaged. “There are only election promises“, concludes the tax specialist.
