Federal Government reaches agreement on excise duty on energy, VAT to remain a 6%
Belgium’s Federal Cabinet has reached an agreement on reforms to the way in which energy bills are taxed. What had hitherto been a temporary reduction in the rate of VAT from 21% to 6% will become permanent. In order to compensate for the loss income to the exchequer excise duty will be levied on gas and electricity. The extension of the cheaper “social tariff” for energy to cover the income group just above those in the lowest income bracket will be gradually repealed. The social tariff was extended to cover this group in order to help them cope with the spiraling cost of gas and electricity.
From 1 April VAT on gas an electricity will be permanently fixed at 6%. VAT on energy was lowered from 21% to 6% as a way of helping soften the impact of the big rise in energy costs.
The measure had been prolonged several times and from 1 April will become indefinite. However, the Federal Government needed to find a way of compensating for the loss of revenue that a permanent reduction in the rate of VAT on electricity and gas will bring about. From 1 April excise duty will be levied on gas and electricity.
The Federal Government has built in a kind of emergency break into the measures though and if the price of energy were to start to rise significantly again between now and 1 April the introduction of excise duty and the gradual repeal of the social tariff for the group mentioned above will be postponed.
The level of duty levied on what is referred to as a “basic package” of gas and electricity (enough for a household’s basic needs) will be set at one rate, while anything that is consumed above this will be set at a higher rate. The measure will add and average of 10 euro/month to the average gas bill and 10 euro per month to the average electricity bill.
Two-stage phase out
The extension of the social tariff to cover 1 million households will be repealed in two phases. The social tariff was extended to cover a wider group in 2021. From next year only those in receipt of social security benefits such as the living wage benefit, invalidity benefit, or the minimum level of old age pension will be charged at the social tariff as was the case before 2021. The social tariff will be repealed gradually with 25% of the difference between the social tariff and the standard tariff being added to the tariff charged to the impacted group each quarter.
Last week the government announced that it had reached an agreement with the energy supply companies to reduce the amount charged on customers’ pre-payment invoices more quickly if market conditions allow. In future suppliers will also review the amount customers are being charged as prepayments three times a year.