CD&V President Sammy Mahdi Highlights 250 Billion Euro Tax Haven Outflows

Each year, payments totaling 250 billion euros are made from Belgium to entities established in tax havens, representing nearly half of the country’s total GDP and dwarfing current budget deficits. CD&V president Sammy Mahdi highlighted this overlooked fiscal lever amid tense federal budget negotiations.

The Scale of Outflows to Tax Havens

The staggering volume of capital leaving the domestic economy amounts to roughly 25 times the size of the current budget exercise. These figures involve entirely legal transactions that participating parties formally declare to the Federal Public Service Finances via a special declaration. For the 2023 tax year, that outbound total reached 288 billion euros. Mahdi points out that these funds drain away from the local economic cycle, directly shrinking the overall financial pie available for public services and wage growth.

Economic policy alternatives remain central to breaking current political gridlock over taxation. Mahdi argues that applying mediation principles to the federal budget shifts the focus away from rigid positions and toward shared interests. While one political faction aims to raise tax revenues without harming the broader economy, another prioritizes the protection of purchasing power for vulnerable households. Both goals are entirely reconcilable.

Untapped Domestic VAT Gaps

Before examining outbound capital flows, domestic tax leakage offers an immediate source of public revenue. The VAT gap—the structural difference between value-added tax due and the amount actually collected—stands at approximately 12 percent in Belgium, making it one of the highest shortfalls within the European Union. Business bankruptcies, material calculation errors, and deliberate fraud schemes such as carousel fraud drive this deficit.

Closing that collection gap down to the levels seen in the Netherlands would recover roughly 2 billion euros annually without raising headline tax rates. Eliminating the reduced 12 percent VAT rate would significantly simplify the tax code. Conversely, recent hikes on excise duties—specifically targeting tobacco products—backfired by generating a revenue loss of nearly 800 million euros due to a massive surge in illegal cross-border imports.

Proposed Adjustments to Outbound Corporate Deductions

To capture additional state revenue without worsening the tax burden on labor, policymakers face a clear choice regarding international transactions. Labor taxation remains exceptionally high, earning the nation a reputation as a heavy tax burden for active workers. Redirecting funds back into the domestic market requires altering how tax havens interact with corporate accounting.

Restricting the full tax deductibility of payments sent to tax-haven jurisdictions down to 90 percent would alter corporate behavior. If even a small percentage of those 250 billion euros stayed inside the country, the resulting economic boost and accompanying tax intake would strengthen national geostrategic autonomy.

Avoiding Compromises That Produce Losers

Traditional political compromises often force opposing factions to water down their goals, yielding outcomes that satisfy neither side. Proponents of interest-based mediation argue that assembling a broader puzzle of fiscal options prevents stagnation. Bringing the massive offshore capital flows into the political debate introduces a vital piece that has long remained absent from legislative negotiations in Wetstraat.

For the 2023 tax year, outbound payments to designated tax havens officially totaled 288 billion euros.