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News

08.07.2016

Productivity slowdown: the new normal?

Why does economic growth remain slow in our country? Arne Maes, Economic Advisor at BNP Paribas Fortis sheds light on these issues.

Economic growth in Belgium has been slow for decades. Yet Belgium is not alone in this. Almost all industrialised countries have suffered the same fate and the underlying causes are largely the same.

For example, the gradual transition from a manufacturing to a service economy has led to a slowdown in growth in the countries concerned. Technological progress, which allows the manufacturing industry to produce more efficiently, has a much less marked effect on the services sector. This means that an increase in employment in services acts as a brake on overall growth. 

What about Belgium?

Labour productivity is growing at a significantly slower rate in Belgium than in neighbouring countries. Since the beginning of the crisis, the extent to which productivity has declined in the Belgian services industry, especially in non-market services, such as education, health and government activities, has been particularly striking. Naturally, another issue is that since the beginning of this century, the wages in our country have risen nearly four times faster than our productivity.

One explanation for Belgium’s poor performance could be the lack of innovative technology companies within our national borders. After all, the relative importance of these rapidly-growing sectors in the Belgian economy has waned in recent years, and with it its contribution to research and development.

Moreover, several trends which, historically, have contributed to economic growth are slowly drawing to a close. So-called global value chains, where multinationals ship their products from continent to continent as part of the production process, have gained in importance. In recent years, increased local specialisation has led to significant efficiency gains. As an economy that is strongly focused on international trade, Belgium has always been one of the pioneers in this respect, but comprehensive task specialisation has now reached a natural ceiling.

In addition, the increase in the educational levels of the Belgian population is slowly approaching its limits. As a result, we cannot expect education to make a positive contribution to growth, either.

The new normal?

Some of the developments discussed above are therefore irreversible, but growth itself is not, by any means. Fortunately, there are some ways in which this stuttering economy can be revived.

We need investment in order to improve our long-term prospects. Companies need legal certainty and transparency. In this respect, the forthcoming review of the Belgian Dock Work Regulation Act and the Belgian Excess Profit Rulings tax scheme inspire little confidence.

On top of that, public investment has also fallen sharply in recent years, often under the guise of much-needed consolidation of finances. However, further erosion of the existing infrastructure must be stopped. Even in difficult budgetary times, projects with high added value pay dividends, especially at a time when interest rates remain historically low.

In addition, Antwerp and Brussels are both in the top five cities for traffic congestion. A redesigning of the existing network and financial incentives affecting individual car usage are absolute musts.

Despite some positive reports, the employment rate – at 67% – remains significantly lower than that in our neighbouring countries. Earlier this year, the IMF put its finger on the sore spot: in the fragmented Belgian job market, some population groups (older people, immigrants) are still finding it extremely difficult to carve out a space. For its part, in its recent country-specific recommendations the European Commission has yet again denounced Belgium's relatively inflexible wage setting. This means that further reforms are urgently needed. 

One thing is clear: the new normal is bringing with it other challenges. However, we will be able to kick-start higher growth if we focus on investments that pay for themselves and structural reforms.

News

12.02.2019

Tax pre-payments even more important as of 2018

Bear in mind that companies that don’t pay enough of their tax in advance now face larger surcharges.

As of 2018 (for the tax year 2019), you will have to pay a higher surcharge if your corporation tax pre-payments aren’t large enough. Companies that didn’t previously pay much attention to pre-payments during the course of the tax year are strongly advised to do so now. Nothing has changed for self-employed people subject to personal taxation.

From 2018 onwards, it’s particularly important to make your tax pre-payments

The surcharges imposed in the event of insufficient pre-payments have been calculated for years based on ECB interest rates. But this reference rate has been less than 1% in recent years, obliging the government to set higher surcharges by Royal Decree.

It was decided at the end of 2016 that a permanent solution was needed, and so new legislation was passed, which comes into effect as of the 2018 tax year (i.e. for all financial years commencing 1 January 2017).

Since then, the reference rate has been set at a minimum of 1%. Under the ‘Summer Agreement’ approved at the end of 2017, the rate was further increased to 3% in the case of corporation tax. The reference rates are multiplied by 2.25 to arrive at the final surcharge applied to the amount of tax payable. In specific terms, this means that as of the 2019 tax year (financial years commencing 1 January 2018), the surcharge imposed on non-payment or underpayment of advance corporation tax has tripled from 2.25% to 6.75% of the tax liability. The same applies for subsequent years, when the surcharge will be at least 6.75%.

The ‘Summer Agreement’ also scraps the so-called ‘de minimis’ rule in relation to corporation tax, which means the surcharge will also apply if it is less than 0.50% of the tax liability or less than EUR 50.

The government aims in this way to encourage more companies to make tax pre-payments (in good time) in periods of low interest rates.

The benefits of pre-payments

Companies are not obliged to make pre-payments. The advantage of doing so is that the surcharge described above can be reduced or avoided. Businesses do not, however, qualify for the kind of tax benefit available to private individuals, which means there is nothing to be gained by making an unnecessarily high pre-payment.

A cut-off date for the pre-payments is set for each quarter throughout the financial year. The earlier in the financial year that you make a pre-payment, the more any eventual surcharge is reduced. Due to the increase in the reference interest rate, these reductions have also been tripled.

In specific terms, a company whose financial year coincides with the calendar year and which...

  • makes a pre-payment before 10/04/2019 (first quarter), receives a 9% reduction
  • makes a pre-payment before 10/07/2019 (second quarter), receives a 7.5% reduction
  • makes a pre-payment before 10/10/2019 (third quarter), receives a 6% reduction
  • makes a pre-payment before 20/12/2019 (fourth quarter), receives a 4.5% reduction

... calculated in each case on the amount of the pre-payment for that quarter.

The cut-off dates for companies whose financial year does not coincide with the calendar year fall on the tenth day of the fourth, seventh and tenth month and on the twentieth day of the final month of the financial year. Specific rules are provided for companies with a financial year of more or less than twelve months.

The new rules mean that a surcharge for the tax year 2020 can be avoided if 75% of the tax liability is paid during the first quarter or 90% of the tax liability is paid during the second quarter. If pre-payments are only made in the third and/or fourth quarter, more than 100% of the tax liability must be paid to avoid an increase.

For self-employed people subject to personal taxation (such as a manager or company director), similar rules apply as for companies, although the rates have not been increased in this case (surcharge of 2.25%, reductions of 3%, 2.5%, 2% or 1.5%). The ‘de minimis’ rule also continues to apply and the calculation of the potential surcharge only differs by a few percentage points. What’s more, an additional tax benefit or rebate is granted in the case of personal taxation on pre-payments that exceed the amount required to avoid a tax surcharge. This benefit is calculated quarterly at half the percentages set out above.

How much tax is it best to pre-pay?

  • You are free to choose the amount. But you should bear in mind that if you wait until the third or fourth quarter, you will have to pay over 100% of the tax liability in advance.
  • Check your income from the previous financial year and take account of any changes in your business activities, investments or turnover. Be sure to consult your accountant or visit the official government website (FR/NL).
  • Try as much as possible – especially in the case of corporation tax – to limit your pre-payments to the amount needed to avoid the surcharge. If you make an excessively high pre-payment, you’re effectively providing the state with an interest-free loan.
  • If you realise towards the end of the financial year that you have made more profit than anticipated, you can still make an extra pre-payment up to the twentieth day of the final month of the financial year.
  • Also consider the special credit formula offered by the bank to cover your tax pre-payments. The interest on loans of this kind is tax-deductible as a business expense, although the main reason for choosing a solution like this is the improved cashflow management it provides.

Which account should payments be made to?

  • For companies that do not close their balance sheet on 31/12: the advance payments for the ongoing 2019 tax period (2018 revenues) must be made to the existing account number: BE20 6792 0023 3056 (BIC: PCHQ BEBB).
  • For companies that close their balance sheet on 31/12, the advance payments from the 1st quarter of the 2020 tax period (2019 revenues) must be made to a new account number:
    BE61 6792 0022 9117.

    For payments to the new account number, it is necessary to use a structured message based on the company number (CBE – the Crossroads Bank for Enterprises).
News

12.02.2019

BNP Paribas Group, results 2018: the business was up

In the context of economic growth in Europe, the business of BNP Paribas was up in 2018 with higher outstanding loans. The revenue evolution was however penalized by the still low interest rate environment and an unfavorable financial market context with particularly challenging conditions at the end of the year.

WB_News_BNP_Results_en


Chief Executive Officer of BNP Paribas, Jean-Laurent Bonnafé:

“Thanks to its diversified and integrated model, the Group delivered in 2018 7.5 billion euros in net income. BNP Paribas’ digital transformation plan is being successfully implemented, illustrated by the roll out of numerous new customer experiences. The Group is actively executing its ambitious policy of engagement in society. The Group is committed to its 2020 ambition and implements further savings to significantly improve operating efficiency in all the operating divisions as early as 2019.


WB_News_Results_BNP_full_year_2018_en


Link to the press release


News

08.02.2019

Apple Pay: for your professional expenses too

Does your company provide its employees with debit and credit cards? If they have an Apple device, they can now activate Apple Pay, the contactless payment service, for all their professional expenses too.

This solution allows them to use these devices to pay online or in shops, via all terminals displaying the Apple Pay logo or the contactless payment icon. To do so, they just need to add their Mastercard or Visa credit card and/or BNP Paribas Fortis debit card to their Apple Wallet with SMS authentication.

To find out more, visit our dedicated page (FRNL).

If you have any questions at all, please feel free to contact your relationship manager.

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News

22.01.2019

Solvay links the cost of credit to a reduction in greenhouse gases

Solvay has agreed new terms in an existing €2 billion revolving credit facility, linking the cost of credit to a reduction in greenhouse gases. Solvay concluded this positive incentive agreement with its syndicate of nine banks. BNP Paribas Fortis is acting as Sustainability Coordinator and agent bank to Solvay’s long-term banking partners.

Solvay announced in September 2018 a commitment to cut greenhouse gases from its own operations by 1 million tonnes by 2025 relative to 2017 levels. The Group intends to achieve this reduction by further improving energy efficiency, energy mix and by investing in clean technologies. “We seek to integrate sustainability into all key aspects of our business, including financing. Associating Solvay's ambitious greenhouse gas emissions target to the cost of credit is a logical step. The successful teaming up with our banks shows that the way towards more sustainability is a collective effort," said Jean-Pierre Clamadieu, CEO of Solvay.

I am proud that Solvay has mandated BNP Paribas Fortis to introduce a Positive Incentive Loan mechanism that supports Solvay’s ambitions in reducing greenhouse gas emissions. This innovative solution is a clear example of how we and the syndicated banks we represent aim to serve our clients in terms of value creation. Collaboration between banks and clients is key in driving the economy forward to a more sustainable future,” said Max Jadot, CEO of BNP Paribas Fortis.

Read the full Press Release

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