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Unformatted text preview: the tax base was the same, but for which the
jurisdiction had remained at the federal level.
Since the regionalization of the real estate tax, the Walloon region and the Brussels region have maintained the former
federal rate. However, since 1990, the Flemish region has set the base percentage at 2.5%. The rates on social housing
have changed in the same manner, i.e. they have been maintained in the Walloon and Brussels regions, but doubled in
the Flemish region.
In conjunction with the increase in its basic rates, the Flemish region granted a subsidy on account in respect of the real
estate tax to businesses that satisfied certain investment and employment conditions. Furthermore, it automatically
granted the deduction to which households were entitled57, expressing it as an absolute amount rather than a
As long as registration fees were not fully returned to the regions—such was not the case until 2001—the regions could
not establish the tax rates or exemptions, but were confined to collecting piggyback taxes or granting refunds. No region
has ever implemented piggyback taxes or refunds.
To conclude this section, we wish to point out that the trend observed reflects the change that economic theory
pertaining to reactions of entities in a framework of tax competition could have predicted. The Flemish region has clearly
decided to tax proportionally more heavily the less mobile tax bases. In 1999, revenues from the real estate tax and
registration fees provided an appreciably larger share of regional taxes in Flanders (47% of the total) than in Wallonia
(37%) or Brussels (35%). Conversely, taxation was lighter on the most mobile base, i.e. estate tax and inheritance tax.
In Flanders, this tax accounted for 46% of regional tax revenues, as against 54% in Wallonia and 57% in Brussels.
The Brussels and Walloon regions have made less use of their potential fiscal autonomy until 2001. Those regions had
less budgetary margins than the Flemish region and could not afford to take risks in the evaluation of the budgetary
effects of a fiscal reform. 4.1.3. Circumstances leading to new negotiations The main objective of transferring in their entirety certain taxes to the regions was to enhance regional fiscal autonomy,
the key demand of the Flemish region.
This objective stemmed, with regard to certain taxes, from a concern for consistency. Thus, for example, the regions had
jurisdiction over the rates of estate tax but had no such jurisdiction from the standpoint of duties on gifts. The two taxes
have highly similar structures and objectives.
Flanders demanded complete autonomy in respect of other taxes in order to avoid a recurrence of the problems of
defining jurisdiction that arose in the realm of estate tax. A conflict pitted the Flemish region, which maintained that it
was exercising its jurisdiction in terms of exemptions on this tax, against the federal government, which deemed it to be
a change in the tax base, which comes under federal jurisdiction. Legal proceedings to resolve such conflicts are
cumbersome and lengthy, which is one reason why the Flemish regions wanted to become its own arbitra...
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