It couldn’t be drier. The last paragraph of page 53 of the coalition agreement of Belgium’s so-called ‘Vivaldi’ government reads: “The possibility of tax regularisation will be discontinued as of 31 December 2023.” Back in 2020, that seemed a long way off. But in just under six months, it will become a reality. The possibility of tax forgiveness, subject to a fair yet substantial settlement, will disappear.

Since 2004, four different laws have governed tax regularisation. Very short-lived pieces of legislation therefore. Why should the tax scheme be overhauled again? Goodness knows. Some of you will say that it’s to stop giving fraudsters the opportunity to repent and thus avoid their deserved punishment. Such a rationale is founded on populist views rather than theory. More than one argument can be put forward to reach such a conclusion. Tax regularisation is characterised by high fines and sometimes even an irresponsible broad scope. Moreover, the abolition of the tax regularisation legislation does not contribute to adequate tax law enforcement. If I made such a bold statement, you wouldn’t believe it. But it’s the OECD that came to this conclusion.

When tax regularisation is abolished, it will be up to the public prosecutors to handle these cases. In the past, however, they have already inferred that they do not regard themselves as a counter for the tax administration. Incidentally, the public prosecutor’s offices have a particularly difficult time conducting investigations into foreign assets that have been exposed by international automatic data exchange and which the tax authorities are unable to deal with. A lot of information and objections will therefore be returned to the sender: the tax authorities. There will again be a proliferation of administrative practices.

If that were the case, tax regularisation would have ceased to be a self-service counter for fraudsters a long time ago. This is also apparent from the reported amounts and revenues from the tax regularisation. However, this does not mean that tax regularisation is no longer necessary. The Court of Audit has already made it clear in the past that tax regularisation is useful for taxpayers who have unwittingly made mistakes. Moreover, the painful reality is that the legislation and tax administration itself cannot keep up with our rapidly evolving circumstances. Take the example of the taxation of crypto currencies, for which a position was only barely taken at a time when the practice had been around for years. In such cases, the regularisation is not only convenient, but necessary for taxpayers who seek to regularise their situation retroactively.

An equally important sore point in the abolition of tax regularisation is the banks’ refusal to accept tax-barred capital that cannot be shown to have undergone its normal tax treatment and is linked to a potential money laundering crime. The tax authorities can no longer investigate and tax these assets according to the regular circuit, because the statute of limitations has expired. In practice, however, a regularisation certificate is often the only remedy to repatriate the barred capital to a Belgian financial institution, sometimes even while the banks have been managing the assets for years.

“A self-respecting government gives the taxpayer the opportunity to correct mistakes.”

Whether one agrees with the government’s decision or not, the reality is that, even after 31 December 2023, we will see numerous situations in which some form of tax regularisation will breathe new life into a system that is under pressure. A self-respecting government gives the taxpayer the opportunity to correct mistakes, especially when the tax landscape is as complex as it is in Belgium. A new legislation on tax regularisation will probably be drafted. Let’s make sure it is overall more nuanced and balanced.

The author is a lawyer-partner at Tuerlinckx Tax Lawyers

JAN TUERLINCKX