Homeownership taxation in Flanders: moving towards ‘optimal taxation’?

Abstract

Belgium devolved administrative and budgetary responsibility for the favourable income tax treatment of owner-occupied dwellings to its administrative regions in July 2014. This change allowed the regions to redesign their housing-related tax instruments. This paper examines a tax policy reorientation of the Flemish Region according to the principles of the optimal tax theory based on the proposals of the British Mirrlees Review. These principles are used as a benchmark to determine whether owner-occupied housing is treated favourably via the tax system in Belgium. A brief comparison is also carried out with four other countries (Denmark, Germany, the Netherlands and the United Kingdom) in order to test for the use of these theoretical principles in other tax systems. Since none of the countries come close to optimal taxation and the Mirrlees Review is not uncontested, practice-based recommendations of international organisations are also taken into consideration. It has been determined that, recently, the Belgian tax system and more specifically Flemish homeownership taxation moved closer to what optimal taxation could be, but that this did not come about by explicitly considering the mechanisms of the tax system.

Housing wealth and aged care: asset-based welfare in practice in three OECD countries

“…10. The definition of assessable income and assessable assets is consistent with their measurement in Dutch income tax provisions (Haffner et al, 2015(Haffner et al, , 2016Haffner & Winters, 2016). 11.…”

Long-term developments in housing policy and research

“…In Eastern Europe, 'super (outright) homeownership' was the result of mass privatization. Historically, in many countries 'private' homeownership has been supported by subsidies and favourable taxation, mostly by allowing cost deductions (e.g., mortgage interest) and exempting taxable income (e.g., capital gains) (Haffner & Winters, 2016;Fatica & Prammer, 2018). As such schemes are associated with house price increases or volatility, as well as regressive distributional outcomes (e.g., Heylen & Haffner, 2012), housing economists have repeatedly advised a more tenure-neutral taxation (OECD, 2010;European Commission, 2012).…”

Social Policy in Changing European Societies

“…In Eastern Europe, 'super (outright) homeownership' was the result of mass privatization. Historically, in many countries 'private' homeownership has been supported by subsidies and favourable taxation, mostly by allowing cost deductions (e.g., mortgage interest) and exempting taxable income (e.g., capital gains) (Haffner & Winters, 2016;Fatica & Prammer, 2018). As such schemes are associated with house price increases or volatility, as well as regressive distributional outcomes (e.g., Heylen & Haffner, 2012), housing economists have repeatedly advised a more tenure-neutral taxation (OECD, 2010;European Commission, 2012).…”