A DECADE OF TAX - BENEFIT POLICIES IN BELGIUM. A SIMULATION EXERCISE TO ESTIMATE THE CHANGE IN REDISTRIBUTIVE EFFECT. Dieter Vandelannoote (University of Antwerp) Gerlinde Verbist (University of Antwerp) EUROMOD Research Workshop 2013 – Lisbon

AIM OF THE PAPER Estimate the redistributive impact of changing tax-benefit policies in Belgium over the past decade. Investigate the distributive effects of changes in 1) personal income taxes 2) social insurance contributions (ssc) 3) social benefits What would inequality and poverty be in Belgium if tax-benefit policies had not changed over time?

P OLICY CHANGES Social security contributions: - Different implementation of the workbonus. - No indexation of the amounts used for the calculation of the special ssc. Taxes: - Different implementation of the general base tax allowance / the regional tax credit scheme. - Change of the income testing of tax credits for unemployment. Since 2009 on an individual level. Benefits: - Child benefits: change in implementation of the back- to-school premium.

P OLICY CHANGES Big tax reform: - 2 highest tax rates (52,5% and 55%) are abolished. Middle brackets were broadened : crisis tax of 3% (abolished in 2003) : New system of mortgage deduction: dwelling bonus. Child benefits: : no back-to-school premium or specific supplement for single parents. - Different calculation of the guaranteed child benefit. No results for 2001 presented: 2001 Euromod version produces some strange results, further investigation is necessary.

M ETHODOLOGY Focus on 3 years: 2001 – 2007 – Dataset: BE-SILC 2010 (incomes 2009), uprated to 2011 as our baseline. BE-SILC 2010 with new calculated gross incomes (better estimation of poverty / inequality indicators, see presentation tomorrow). Policies simulated within Euromod: ssc / taxes / benefits (only bch_s / bchba_s / bsa_s / bsaoa_s)

M ETHODOLOGY ABC Data2011 down- rated to Policy A → C: total effect (both uprating and policy changes). A → B: uprating effect. B → C: policy effect. different from the methodology used by Essex. advantage of this new methodology: no deflating of parameters in Euromod itself. Only downrating of data is necessary.

M ETHODOLOGY - EXAMPLE total effect: 0% uprating effect: -0,42% policy effect: 0,42% We call this a policy effect, even though there is a system of automatic indexation in Belgium (this remains a policy choice!)

F IRST RESULTS – NET DISPOSABLE INCOME Change in disposable income (%)

F IRST RESULTS – SSC Change in disposable income (%) due to SSC

F IRST RESULTS – P ERSONAL I NCOME T AXES Change in disposable income (%) due to PIT

F IRST RESULTS – SIMULATED BENEFITS Change in disposable income (%) due to benefits

F IRST RESULTS – INEQUALITY GiniTotal effect Uprating effect Policy effect gross income + replacement income (1) -0,40% 0,00% (1) – ssc-0,65%-0,50%-0,15% (1) – ssc – taxes-0,90%-0,70%-0,20% (1) – ssc – taxes + benefits-1,21%-0,60%-0,61% Data 2011, policy 2011 Data 2011, policy 2007 Data 2007 (down. 2011), policy 2007 Gini0,2670,2730,279 Theil0,1270,1330,140

F IRST RESULTS – POVERTY Data 2011, policy 2011 Data 2011, policy 2007 Data 2007, policy ,08%15,88%16,88% Poverty, 60% of the median equivalent disposable income (ils_dispy)

T O DO Check 2001 policy system and calculate outcomes Expand outcome indicators (e.g. decomposition over population groups). Look into detail at specific income components. Check significance of changes (see presentation Lina Salanauskaite tomorrow).

THANKS FOR YOUR ATTENTION