u/IiIIIlllllLliLl

PART 1: https://www.reddit.com/r/belgium/comments/1v65gsg/is_the_belgian_tax_system_broken_how_two/

PART 2: https://www.reddit.com/r/BESalary/comments/1valuxt/part_2_is_the_belgian_tax_system_broken_how_to/

TL;DR:

1. Tax optimizations make a huge difference at every level of employer cost
2. When using tax optimizations, income taxes can sometimes be regressive
3. The work bonus leads to insane marginal tax rates

Parts 1 and 2 focused on specific cases, so today I wanted to look at something more general. Starting with the assumptions:

• The gross-only salary only increases gross and has no tax optimizations
• The maximally optimized salary has access to mobility budget (pillar 2), cafeteria plan, meal vouchers, ecocheques, sport & culture vouchers, CAO 90 bonus, telecommuting allowance, internet allowance, PC allowance and representation allowance
• Both salaries assume a single individual with no dependents working a standard 38 hour week (so we won't be using the flexi-job system to optimize further like in part 2)
• Municipal tax rate is 7.5% in both cases

The dark green section of the maximally optimized line in all three graphs represents where we can add highly efficient tax optimizations. The four dots correspond to these salaries:

• Minimum wage with cafeteria plan, lowest possible employer cost: https://belgian-wage-calculator.vercel.app?share=8PsduE
• + 100% efficient allowances: https://belgian-wage-calculator.vercel.app?share=bnusrE
• + Meal vouchers https://belgian-wage-calculator.vercel.app?share=F3ShYP
• + CAO 90 Bonus: https://belgian-wage-calculator.vercel.app?share=NMAZ3C

Afterwards, we run out of tax optimizations, and we simply increase gross while keeping the mobility budget as high as possible.

The first graph shows the effective tax rate at different levels of employer cost. Interestingly, we see that the tax rate actually decreases at first for the optimized salary. In a properly designed system, this should obviously never happen. Unfortunately, we're in Belgium.

Apart from that, it's clear that if you have the privilege of being able to seriously optimize your salary, the tax rate isn't actually that bad compared to other countries. If you can't, however, your tax rate quickly jumps to absurd levels.

The second graph shows the effect of the tax optimizations in real euros. The deep green section is practically running parallel to the 0% tax line. This can clearly be seen in the third graph as well, where the optimized salary stays at, or close to, 100% efficiency for a pretty long time. On this graph you can also see the insane effect of the work bonus. Both the gross-only and the optimized salary take a huge hit to efficiency when increasing gross while the work bonus is still active, but this is especially visible in the gross-only salary, where marginal efficiency drops to under 20%! That means that your employer can spend €1k more on you, and you will see less than €200 euros extra in your bank account.

PART 1: https://www.reddit.com/r/belgium/comments/1v65gsg/is_the_belgian_tax_system_broken_how_two/

Last week's post compared two employees at the same employer cost, showing that tax optimizations could result in a net difference of €1,264/month.

Today's post is slightly different. Instead of trying to maximize net income at a fixed employer cost, we'll try to minimize the employer cost while keeping the net income close to that of the unfortunate, unoptimized €5k gross employee from last time. The results are genuinely shocking, and even I was surprised by how efficient this setup is.

On the surface, this employee works 7.6 hours, 4 days/week for a very modest income of €1,800 gross/month. This is what the state sees. However, the employee's actual compensation package stacks so many tax advantages that their base salary isn't even half of their total net income!

They get a mobility budget, a cafeteria plan, every type of net allowance (telecommuting, representation allowance, internet, PC) and every type of voucher (meal voucher, eco voucher, sports voucher). On top of that, the employee works a flexi job for 8 hours a week at a rate of €17.5/hour (the average flexi-job rate according to Jobat: https://www.jobat.be/nl/art/waar-verdien-je-als-flexi-jobber-het-meest )

When you add it all up, this employee works about 38 hours a week for a net income of €3,801/month. This is HIGHER than the net income of the unoptimized €5k gross/month employee from part 1, which sits at just €3,402/month.

The optimized employee's total employer cost (primary + flexi) is just €55,115/year, compared to the unoptimized employee's €85,850. Over €30,000 less per year. But despite this, the former has a higher purchasing power, because only 16% of their employer cost goes to the state, compared to 52% for the latter. Absurd, right?

...But wait, it gets worse.

Because the employee's official taxable income is so low due to their gross being just €1,800/month, they qualify for a whole bunch of social programs:

1. First and foremost, the work bonus ("werkbonus") applied to low income wages means they pay virtually nothing in social security
2. If they live in Flanders, they can also receive the "Vlaamse jobbonus". In their case, a cash payment of over €400/year
3. If they live in Flanders, they qualify for category 4 of "Mijn VerbouwPremie" and "Mijn VerbouwLening". This means that if they renovate their house, they can get up to 50% of the costs paid by the government, and the other 50% can be covered by an interest-free loan of up to €60,000 paid back over 25 years

Note that none of the perks above require you to prove you "need" them. They are simply handed out based on your taxable income. All of this is perfectly legal.

Is this really acceptable?

Source for all claims: https://belgian-wage-calculator.vercel.app/?share=E2cDFU

Belgium is famous for its high taxes on labor and tax optimizations ("koterijen"), but many might not realize how significant these optimizations can actually be. This post evaluates two different employees with the same cost to their employer but vastly different net pay.

The first employee has done pretty well for themselves, earning a gross salary of €5,000 per month. However, their employer does not believe in tax optimizations. They prefer to pay their employees in "euros, not cars". This employee only receives the legally mandated 13th month and double vacation pay, with no further advantages.

Total cost to employer: €85,850/yr
Employee net take-home: €3,402/month
Source: https://belgian-wage-calculator.vercel.app?share=82zH9h

The second employee has also done pretty well for themselves. However, their employer takes tax optimizations very seriously. Although their gross salary is lower (~€3,800), they receive many additional benefits: An extensive cafeteria plan, a maxed out mobility budget, meal cheques, eco cheques, net compensations, and a generous CAO90 bonus. The difference is substantial:

Total cost to employer: €85,835/yr (equal)
Employee net take-home: €4,667/month (+€1,264/month!)
Source: https://belgian-wage-calculator.vercel.app?share=dKPF76

Conclusion: Despite both employees having the same cost for their employers, one of them pays 52% in tax, while the other only pays 35% in tax.

Is it time to revisit the way we tax labor in Belgium?

(OC, maar deleted op r/belgium for some reason dus ik zal het hier maar reposten)

Belgium is famous for its high taxes on labor and tax optimizations ("koterijen"), but many might not realize how significant these optimizations can actually be. This post evaluates two different employees with the same cost to their employer but vastly different net pay.

The first employee has done pretty well for themselves, earning a gross salary of €5,000 per month. However, their employer does not believe in tax optimizations. They prefer to pay their employees in "euros, not cars". This employee only receives the legally mandated 13th month and double vacation pay, with no further advantages.

Total cost to employer: €85,850/yr
Employee net take-home: €3,402/month
Source: https://belgian-wage-calculator.vercel.app?share=82zH9h

The second employee has also done pretty well for themselves. However, their employer takes tax optimizations very seriously. Although their gross salary is lower (~€3,800), they receive many additional benefits: An extensive cafeteria plan, a maxed out mobility budget, meal cheques, eco cheques, net compensations, and a generous CAO90 bonus. The difference is substantial:

Total cost to employer: €85,835/yr (equal)
Employee net take-home: €4,667/month (+€1,264/month!)
Source: https://belgian-wage-calculator.vercel.app?share=dKPF76

Conclusion: Despite both employees having the same cost for their employers, one of them pays 52% in tax, while the other only pays 35% in tax.

Is it time to revisit the way we tax labor in Belgium?

As I'm sure we all know, Belgian salary packages are ridiculously complex, with many companies implementing fiscal "optimizations" to mitigate the crushing tax burden on labor. Here's the current "Salary" part of the template:

4. SALARY

• Gross salary/month: EURO
• Net salary/month: EURO
• Netto compensation: EURO
• Car/bike/... or mobility budget: SHORT DESCRIPTION
• 13th month (full? partial?): SHORT DESCRIPTION
• Meal vouchers: EURO/DAY
• Ecocheques: EURO/YEAR
• Group insurance: %SALARY/%EMPLOYER
• Other insurances: SHORT DESCRIPTION
• Other benefits (bonuses, stocks options, ... ): SHORT DESCRIPTION

While it already implements the most common and significant optimizations, it lacks others. Additionally, the net salary (the most interesting number in any package) is not clearly defined. Do you include net compensation? Mobility budget? Meal vouchers? How do you deal with yearly bonuses like the 13th month or the CAO90 bonus? In practice, people use different systems to fill in this field, which makes it harder to compare packages.

u/GraciaEtScientia made an extremely thorough and polished Wage Calculator recently. It's fully free to use, has no ads, and implements all optimizations I know of (including the recently reinstated IP rights). It takes your standard wage, all optimizations, and spreads yearly bonuses over 12 months to show the true net monthly salary of a package. It also shows the total cost to the employer, which gives a sense of how well a package is optimized.

The top bar has a "share" button, so you can fill in your salary, use that button, and then post the link here. There's also a copy button that lets you export a salary configuration to JSON, which might be useful for any devs looking to scrape the data (e.g. u/BerthjeTTV from Wage Watchers).

I think adding this as an (optional) link at the bottom of salary posts could help us all understand Belgian salary packages better. Could we add a line like this to the salary section of the template?

• Wage Calculator link (optional): [URL]