What measures have taken other European countries to reduce their deficits. None has resorted to VAT growth

Several EU states, with the budget deficits far beyond the Maastricht Treaty (3%) have engaged in a tax diet that in 5-6 years will bring them back to normal. HotNews analyzed the case of Belgium, Poland and Malta, where the reforms targeted both expense and income increases. None of these states increased VAT.

Belgium- Public deficit will decrease from 5.4% of GDP in 2025 to 2.9% by 2030

On March 18, 2025, Belgium presented his first fiscal plan for the years 2025-2029 which involves a structural adjustment of 0.25% of GDP in 2025, given that the late Government formation delayed the implementation of new measures. Based on the trajectory of net expenses, it is expected that the public deficit will decrease from 5.4% of GDP in 2025 to 2.9% by 2030.

Belgium focused on the trajectory of government spending, whose increase was capped at 2.6% in 2025 compared to 2024, but also on pensions, tax and labor market, as well as the expected implementation of reforms and investments

The plan stipulates that 2/3 of the fiscal consolidation effort during the plan period comes from structural reforms on the labor market (limiting unemployment allowances) and pension reform (introducing a bonus/malus system, harmonizing the different pension regimes to strengthen the working years and pensions received, modification of indexes). In addition, 1/3 of the taxation of households with the highest income and other income measures.

The plan of Belgium involves significant positive effects of the second round, but not specific in detail, from a rate of participation in the labor market reaching 80% by 2029, which would require a strong increase in current levels. Within the plan, Belgium is committed to making 25 reforms and investments, aiming at improving potential growth and fiscal sustainability

The plan stimulates the work, including by limiting the unemployment benefits over time, as well as reducing long-term medical leave, administrative pregnancy and compliance costs for SMEs.

Reforms in the fiscal field aim to reduce the tax burden on the labor force, improve competitiveness and strengthen investments.

The plan also includes the reduction of the income tax that will be adopted until the 4th quarter of 2025 and implemented until the 1st quarter of 2026.

Two measures in the plan will support the competitiveness by tempering the salary costs and reducing the electricity transport tariffs in the high energy consuming industries.

The financing of this fiscal reform will come partially from the expansion of the tax base, including the introduction of a taxation tax, and is complemented by a reduction of social assistance expenses.

Belgium will digitize government services. and will reduce fiscal task over companies. These two measures are expected to be adopted until the 4th quarter of 2025 and implemented until the 1st quarter of 2026.

Also, their assumed intention is to apply the tax exemption for research and development activities, overtime and night work/in shifts.

It will also limit unemployment benefits to a maximum of two years and reduce the maximum duration of medical leave

By the first quarter of 2026 the legislation that reduces the tax burden for those active on the labor market will enter into force

During this year the administrative task for companies will be reduced, the procedure will be simplified to improve the access of SMEs to public procurement and will develop the legislation oriented towards the establishment of start-ups to reduce the costs of carrying out the activity.

Poland reduces deficit to 5.5% of GDP in 2025 and 3% by 2028

Poland has engaged in a multiannual fiscal adjustment plan aimed at reducing the deficit to 5.5% of GDP in 2025 and to 3% by 2028. This involves controlling the nominal net public expenditure to 6.3% this year.

In 2025, the public expenses will be kept high, determined by the increase of the expenses with the defense, the investments, the social benefits and the expenses with the interest.

Public investments will exceed 5% of GDP as a result of accelerated deliveries of military equipment and substantial investments in transport and energy infrastructure.

Indexing pensions and new social benefits, including the “Active Father” program, exemptions from the payment of social contributions for entrepreneurs or “widow pension”- all will increase government expenses

The increases of excise duties and non -ventilation of income tax tranches will increase government revenues, supporting a gradual fiscal consolidation.

Poland also relies on limiting compensation and gradually withdrawing subsidies, especially those for energy.

Also to increase the income, there will be increases in excise duties: in cigarettes by 25%, in smoking tobacco by 38%, in cigars and sheets of sheets by 25%, in heated tobacco products will increase by 50%and in the liquid for electronic cigarettes by 75%

Implementation of the global minimum tax (Pillar II of the OECD): Starting January 1, 2025, Poland has introduced the global rules on the minimum tax (a 15%share) targeting the large multinational and national groups with revenues of over 750 million euros.

Malta- Deficit will reach 3.5% in 2025

The government estimates that the deficit will reach 3.5% in 2025, decreasing from 4.0% in 2024 and 4.5% in 2023. Although still raised from a historical perspective, the deficit is to continue, in order to reach the target of 3.0% by 2026.

Malta reduced the taxation of the taxes of low and medium income in order to reduce the financial burden for them. The tax exemption threshold for single, married and parents was increased, however

Maltese relive on education, doubled fiscal deductions for parents whose children attend private schools. The “Get Qualified” and “Higer Educational Qualifications” schemes have been extended, allowing the granting of fiscal credits to students who follow master's or doctorate studies.

Malta will postpone the introduction of the minimum tax rate of 15% for companies that are part of a group with an annual turnover of at least 750 million euros.

This year, the minister mentioned the provisions on qualified repayable tax credits (QRTC) and informed that Malta is still in discussions with the European Commission on the introduction of such measures and incentives, which can be offered in the form of fiscal grants or credits, which are expected to be used to maintain the attractiveness of Malta, in the same time.

In addition, a 1.5% tax rate is applied for family business transfers. The succession tax for the leased agricultural land was eliminated as part of the reform in the agricultural sector.

An increase in fiscal credit has been granted to parents who have a child with disabilities, who will now be 750 euros instead of 500 euros.

The adopted health reforms include an investment of 14 million euros in reducing waiting times and offering free medicines for seniors over 75.

The VAT rate for sanitary products related to women's health will be reduced to 0%. This reduction is also applicable to medical accessories related to cancer treatment.

Extension of fiscal incentives for properties built over 20 years ago and vacations over 7 years. These incentives cover tax and stamp duty exemptions and a subsidy of EUR 15,000 or EUR 40,000 for the first buyers of such properties

The Maltese government set up a dedicated unit, focused on the development of technology, to stimulate innovation

The Maltese Government's risk capital fund, recently established, with an EUR 10 million funding, will provide capital to new businesses through capital investments.

In the gambling sector, the government launches the video gaming gateway initiative, which offers financial assistance for innovative game projects. Basecamp, a dedicated incubator, will also support startups focused on the development of video games and electronic sports.

Local alcohol production will benefit from excise reductions in low alcohol beer produced by small and independent beer factories, together with significant excise duties for small wine producers.

In a step towards a sustainable agriculture, organic waste will occur for soil additives, which will be distributed for free to local farmers.

Meanwhile, the creative sector will benefit from EU funding worth 15 million euros, meant to encourage cultural and artistic projects that stimulate economic activity.

An additional amount of EUR 2 million will be allocated to the Creative Malta program to support local film producers, increasing the attractiveness of Malta as a destination for film production and contributing to the creation of jobs in the creative sector.