ATA is currently focusing on five lines of research.
1. The ability-to-pay principle as a leitmotiv for the reform of personal income tax in an active welfare state
When income tax legislation was reformed in 1962, legislators tried to take into account the tax-bearing capacity of the taxpayer. This ambition was particularly important in the development of the personal income tax. Since then, this tax has been levied on overall income, regardless of its nature, and the cumulative taxation of the income of spouses has been generalised.
The legislator based the procedure on the idea that honest burden-sharing could not be achieved when taking into account the fiscal capacity of the individual alone. The family was seen as an economic unit, and the composition of the taxpayer's family was therefore taken into account when assessing his or her tax-bearing capacity. This resulted in an increase in the personal allowance and a progressive reduction based on the number of dependants. On the basis of that principle, it was deemed justifiable to introduce progressive income tax rates. Care was taken, however, to ensure that this progressive rate would not raise taxes so high that it would lead to a levelling of incomes rather than to an equitable adjustment of the tax burden to the actual tax-bearing capacity. The fact that income taxes are levied on a net income basis is also the result of the ability-to-pay principle.
Over the years, however, the Income Tax Code has changed frequently and the original idea of developing a simple tax has largely been lost. In addition, less and less is being said about the ability-to-pay principle.
This raises the question of whether, generally speaking, our current system still meets the constitutionally grounded equality principle, which can be regarded as the basis of the ability-to-pay principle. The heavy tax burden on employment income when compared to the tax burden on other forms of income is a classic example. Despite several legal interventions the Belgian tax burden on wage earners is still one of the highest in the world .
Furthermore, the various changes made to the Income Tax Code since 1962 have rendered Belgian income tax hopelessly opaque and complicated, and we may well wonder which principles currently govern our income tax system.
Taxpayers are increasingly struggling to grasp the logic of the system. They are faced with numerous rapidly changing tax rules which lack consistency and logic and are difficult to understand. Because of this, there is a real risk that taxpayers will become increasingly alienated from the tax regime to which they are subjected. One of the consequences of this alienation is that they may find it harder and harder to understand the purpose of the substantial financial effort that is expected of them every year.
Today's income tax system has a number of fundamental shortcomings that require more thorough reform. In order to ensure that reform is based on sufficient (public) support, a thorough preparatory debate that draws on interdisciplinary fundamental research will be required. For example, we should ask again whether the original principles related to income tax (namely a simple, efficient and fair tax based on tax-bearing capacity) are still valid. If the ability-to-pay principle is no longer considered an acceptable starting point, then we must identified which other principle(s) should shape the tax. However, if the ability-to-pay principle is still accepted, then the question arises as to whether this ability should be judged on an individual basis (per taxpayer) or if legally structured forms of cohabitation should be taken into account (e.g. actual cohabitation, legal cohabitation, marriage, etc.). When using the ability-to-pay principle as a basis for taxation, we should also ask ourselves whether it is justifiable to tax different forms of income so inconsistently. Compare, for instance, the tax on income from movable assets and certain types of property income with the tax burden on employment income.
Is the assessment of tax-bearing capacity limited to the tax-bearing capacity indicated by income (regardless of its origins: labour or capital), or should we also take into account all of the taxpayer's other assets, even if they do not generate any income? When determining tax-bearing capacity, should other factors be taken into account in addition to income and/or assets (e.g. the link between tax-bearing capacity and cognitive abilities, etc.)?
2. Entrepreneurship in the 21st century and new technologies: tax opportunities and challenges
Entrepreneurship in the 21st century and new technologies: tax opportunities and challenges
New technologies and digitization have a fundamental impact on our society. This evolution brings with it tax opportunities as well as challenges.
On the one hand, new technologies (data mining, blockchain, internet of things, etc.) provide opportunities for the tax administration in terms of efficiency, as a means of better enforcement of tax obligations. This increased efficiency can help businesses to have more confidence in a well-organized government, to reduce the administrative burden, to increase transparency and to improve compliance. However, privacy considerations and, more generally, the legal protection of the taxpayer must also be taken into account.
On the other hand, digitization leads to a new economic reality (e.g. new forms of working and new business models), which is not sufficiently taken into account by current regulation. It is important that, even in this new economic reality, companies pay a fair share of taxes according to where value is created. Furthermore, digitization presents new risks of aggressive tax planning and competition between Member States to attract investment. Belgium, too, has not escaped this and, as a small open economy, even participates effectively in this fierce competition.
The regulatory framework must be adapted to this evolution in order to continue to meet the requirements of equality, ability to pay and efficiency. This is a challenge as value creation in the digital economy is less linked to physical presence than to intangible assets inherent in digitization (intellectual property rights, artificial intelligence).
The adaptation of international, European and Belgian corporate taxation to these global developments is central to this line of research.
3. Fiscal federalism
Given the pressure of the financial crisis and the subsequent economic crisis, there seems to be an increased need in the EU and especially in the Eurozone for further fiscal and budgetary integration. This observation prompts questions about Member States' ceding fiscal sovereignty in favour of the EU or the Eurozone.
Should the strengthening of the economic and monetary union within the European Union, and especially in the Eurozone, actually lead to increased participation at European level when Member States exercise their own fiscal powers? And if so, to what extent are those Member States willing to allow this deeper involvement in Europe and how does all this relate to the so-called principle of subsidiarity?
Does a monetary union also imply that Member States will (eventually) have less national fiscal sovereignty and that a European tax will be introduced?
Finally, the evolution towards more regional autonomy in the EU Member States raises questions about the opportunities and limits linked to the division of fiscal powers among multiple levels of governance and the way in which administrative empowerment processes can be finalised optimally when it comes to taxes.
4. The tax status of private assets
The research - in this fourth line of research - involves the tax status of private assets.
On the one hand, the research focuses on the tax status of private wealth during lifetime. The research primarily focuses on the tax consequences of acquiring assets. Attention is also paid to the tax treatment of asset management.
Secondly, the research focuses on the tax treatment of the transfer of assets and the relation between taxes on these transfer of assets and taxes on the assets itself. The tax regime of the transfer of assets reflects a special and often particular look of the tax legislator at traditional concepts as family and assets. Thus, the tax legislator encourages through various techniques (categories heirs, assimilations, exemptions and reductions) the family formation. These include the tax status of partner relations or the tax treatment of care relations. Through exemptions and reductions in the transfer of certain assets tax legislation influences the manner of composition of the assets. Examples include the tax treatment of family businesses, but also the exemption of the inheritance of the family residence.
5. Comparative (legal) research on taxation
The fifth and last research line focusses on comparative research. This research line has two streams.
1. The first stream investigates local, regional, national, European and international problems from a comparative perspective. Structural similarities and differences between tax systems are the main object of the research. The research for instance includes the status of legal principles, interpretation methods, measures against aggressive tax planning, incentives for research and development, autonomy of local authorities and the government as a taxpayer.
The purpose is to understand similarities and differences in tax systems and to propose new approaches, both from a multidisciplinary perspective (law, economics, sociology, philosophy, psychology or history).
The comparative research also contributes to the other research lines of Antwerp Tax Academy (i.e. the ability-to-pay principle, taxes as an instrument for promoting entrepreneurship, fiscal federalism and the tax status of private assets).
2. The second stream investigates the functions of the comparative legal research method in fiscalibus.
First, literature argues that comparative research increases the knowledge of one’s own law, since it broadens the frame of reference. As such comparative research may lead to new approaches to understand and improve one’s own law.
Second, national tax systems are not mutually coherent, resulting in a lack of coordination (e.g. derogation to the ability-to-pay principle, double taxation, gaps leaving room for aggressive tax planning). Comparative research increases the understanding of other tax systems and contributes to the alignment of tax systems.
Finally, it is subject of debate whether the comparative method’s functions are even wider. The European Court of Human Rights for instance uses this method when interpreting human rights enshrined in the European Convention on Human Rights. Also, certain national courts use this method when interpreting national tax law.
This research line investigates the functions of the comparative research method in fiscalibus: what are its opportunities and its limits?