Transfers from individuals to the government sector

Transfers from individuals to the government come from the payment of taxes and social contributions. In practice, the analysis focuses on social contributions, personal income tax, and indirect taxes (VAT and excise duties). Other taxes paid by households, such as real estate taxes, withholding tax, local taxes, etc. are not considered because these are of minor importance and information on the distribution of these taxes is lacking.

As explained above (see section 2 and annex I.1), only social contribution for employees is (in)‑directly available from the CBSS (2016) database. All the other transfers need to be estimated based on the income data provided by the CBSS, combined with other sources.

3.2.1 Social contributions and personal income tax

The common pattern observed for social contributions of employees and self‑employed and employers as well as for personal income tax, is a bell shape, culminating near the age of 50, with a tail at older ages. This is mainly the result of a combination of two factors linked to revenue from work : average wages and the employment rate, i.e. the number of people who are wage earners or self‑employed. Average wages increase with age : the increase in human capital through experience is better rewarded, up to a certain point at least. Besides, seniority pay also plays a role, especially in a country like Belgium where the practice is widespread and entrenched in social legislation. Regarding the second factor, employment rates go up at the beginning of the active lifetime, and later decline at older ages. As a result, the contribution from wages on average also decreases at older ages, albeit remaining above levels seen at the beginning of active lifetime.

The same two factors, average wage and employment rate, play a role in explaining the differences observed between groups by origin. Natives, characterised by a higher employment rate and better‑paid jobs, contribute proportionally more on average, whereas people born abroad and especially outside the core EU14 countries contribute less. They have lower‑paid jobs or are more often without jobs (see also HCE, 2018 and section 1.1 of Part II of this report). The large share of posted workers originating from these countries could also play a role : they are counted as resident if they stay more than three months, but their income is not declared in Belgium, which could possibly distort the result for this group (see also annex 1). However, this is not confirmed by evidence from the database, probably because posted workers are themselves not often recorded in the national register.

Wage is clearly a fundamental determinant of the contribution to public finances : social security contributions are to a large extent fixed as a percentage of income, while for personal income taxes, the tax rate rises with the income level. But, in this exercise, it is not possible to distinguish between wages from the private sector and wages from government jobs. Contributions from government sector jobs are partly artificial (remember that taxes and social contributions are mainly estimated, see also section 2 and annex I.1) and could bias the results towards the natives, who have a more than proportional share of public jobs.

3.2.2 Taxes on consumption : VAT and excise duties

For taxes on consumption, such as VAT and excise duties, the pattern is by construction largely driven by the income of the different groups (section 2 and annex I.1 give more information on the assumption needed to estimate consumption taxes). Wages play an important role again, but income from transfers are also considered here. That type of contribution is rather stable from the age of 30 onwards, and is larger for people born in Belgium, who can afford to consume more, because of their higher income. For people born outside Belgium, there is no major difference between the groups, though again those born in new member countries seem to contribute the least (worse than non‑EU).

Chart 6

Transfers paid by individuals : income taxes and social contributions

(€ per year per person in the age group)

Income taxes Social contributions employees and self-employed

0‑14 15‑19 20‑24 25‑29 30‑34 35‑39 40‑44 45‑49 50‑54 55‑59 60‑64 65‑69 70‑74 75+

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

0‑14 15‑19 20‑24 25‑29 30‑34 35‑39 40‑44 45‑49 50‑54 55‑59 60‑64 65‑69 70‑74 75+

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

0‑14 15‑19 20‑24 25‑29 30‑34 35‑39 40‑44 45‑49 50‑54 55‑59 60‑64 65‑69 70‑74 75+

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Social contribution employers

Age groups Age groups Age groups

Natives EU14

EU13 (Other EU28) Non‑EU

Non‑natives, of which :

Sources : CBSS Datawarehouse, NBB calculations.

3.2.3 Total transfers paid by individuals

When considering all transfers paid together, our aggregate measure is largely driven by work‑related transfers (social contributions and personal income taxes). The observation made above for this type of transfer remains valid in this case : a bell shape culminating around 50  and higher contributions from natives followed by people born in core EU countries. People born outside EU and in the new member contribute less on average.

The differences between groups are quite bigger than for transfers received and are even more closely driven by economic activity status, as can been seen from the considerable differences between contributions from people in employment and those not in employment.

Among people in employment, it is interesting to note that that natives and people from EU14  countries show a very similar pattern. The group of individuals from other EU countries (EU13) is the one with the lower contributions, despite a high employment rate, indicating low average wages. The non‑EU group is in a middle‑

of‑the‑road position.

Chart 7

Transfers paid by individuals : taxes on consumption

(euros per year per person in the age group)

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Consumption taxes

Age groups

Natives

EU14 EU13(Other EU28) Non‑EU Non‑natives, of which :

0‑14 15‑19 20‑24 25‑29 30‑34 35‑39 40‑44 45‑49 50‑54 55‑59 60‑64 65‑69 70‑74 75+

Sources : CBSS Datawarehouse, NBB calculations.