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

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.status: publishe