Belgium will temporarily cut taxes and hand out cash to households to compensate for soaring energy prices, the government announced Tuesday.
“We want to protect and strengthen people’s purchasing power at a difficult time,” Prime Minister Alexander De Croo said during a press conference to unveil the new measures.
The Belgian government is mainly targeting electricity prices: The VAT on electricity has been temporarily reduced from 21 percent to 6 percent from March 1 to July 1; all households will get a one-time electricity bill discount of €100; and lower income families get an extension of a social tariff from March 31 until the end of June.
The new measures will cost €1.1 billion, which angered the opposition as it demanded to know how the government would pay considering Belgium’s high levels of public debt.
The government is also working on an “in-depth reform of the excise duty” to address the soaring prices “in a structural way,” said Tinne Van der Straeten, the Green energy minister. The energy and finance ministers are due to put forward a proposal by March 1.
In an effort to minimize the hit to the budget, the reform will allow excise duties to rise if energy prices fall below a certain level.
Belgium is the latest in a series of EU countries to bring in tax cuts, subsidies and other measures to lessen the sting of soaring power prices.
A Belgian compromise
Belgium’s seven-party coalition government reached the agreement after fraught negotiations — not unusal for getting complex policies accepted by a government that spans the political spectrum.
The main stumbling block was the VAT cut.
Finance Minister Vincent Van Peteghem, a Christian Democrat, wanted a 6 percent VAT cut, an idea also backed by the Flemish Socialists and the Greens. De Croo’s Flemish liberals objected — worried about Belgium’s budgetary situation and because a VAT cut wouldn’t do much for the self-employed and entrepreneurs, the liberals’ traditional voters, who already benefit from a VAT deduction on their energy bills.
The francophone Socialists and De Croo’s party were in favor of the one-time energy discount, with the liberals arguing that this should be coupled with an in-depth study of the VAT reduction.
Critics complained that the coalition infighting delayed the measures, but De Croo hit back: “I think the federal government is showing that it can take measures that are balanced and that correspond to the reality on the ground.”
In the end the deal was a classic Belgian compromise.
“In Belgium, we have a tradition of discreet permanent negotiations,” said Benoît Rihoux, political science professor at UCLouvain. The seven parties strike a deal on a bigger, more contentious file, while also negotiating on other minor files. “What often happens is that one party weighs more on one issue in order to make progress on another issue later on.”
Barbara Moens contributed reporting.