Homeownership taxation in Flanders: moving towards 'optimal taxation'?

Belgium devolved administrative and budgetary responsibility for the favourable income tax treatment of owner-occupied dwellings to its administrative regions in July 2014. This change allowed the regions to redesign their housing-related tax instruments. This paper examines a tax policy reorientation of the Flemish Region. It specifically applies the principles of the optimal tax theory based on the proposals of the British Mirrlees Review as a benchmark to determine whether owner-occupied housing is treated favourably via the Belgian tax system. A brief comparison is also carried out with four other countries (Denmark, Germany, the Netherlands and the United Kingdom) in order to test for the use of these theoretical principles in other tax systems. Since none of the countries come close to optimal taxation, and as the Mirrlees Review is also not uncontested, practice-based recommendations from relevant international organisations are also taken into consideration. Indeed, it has recently been suggested that the Belgian tax system and more specifically Flemish home ownership taxation, has moved closer to what optimal taxation could be, but that this has not come about by explicitly considering tax system mechanisms.