According to a 2008 International Monetary Fund (IMF) Report on the Observance of Standards and Codes (ROSC), Belgium meets and in some cases exceeds the requirements of the IMF's fiscal policy transparency code. The ROSC observes that overall fiscal policy in Belgium is rooted in a sound institutional and legal framework, roles and responsibilities in the budget process are clear (i.e. there is a well-defined separation between the executive and legislature), and fiscal information is made available to the public through regular publications and extensive use of the internet. In addition, the ROSC notes that the budget formulation is underpinned by thoroughly formulated and clear medium-term macroeconomic forecasts and fiscal policy goals. Nevertheless, the ROSC found several areas where Belgium could improve its fiscal transparency regime. For instance, the Belgian budget process and legal framework are complex and, while open to the public, not transparent for non-experts. In May 2003, the Belgian parliament passed a new budget management bill to simplify the budget process and make it more transparent. The new legislation calls for the creation of internal audit units in departments and agencies. It is expected that this law will be fully implemented during 2008-2010.

General Overview

The International Monetary Fund's (IMF) 2008 Report on the Observance of Standards and Codes (ROSC) observes that Belgium in many areas meets, and in some cases exceeds, the requirements of the IMF's fiscal policy transparency code. However, the ROSC does not assign Belgium compliance levels with any of the four main principles. The ROSC states that the roles and responsibilities of the Belgium budget process are clear and well-defined, adding that the Belgium Constitution and the European System of Accounts of 1995 clearly set Belgium's four main government sectors apart from the private sector. Furthermore, Belgium has a complex administrative structure in which fiscal policy is coordinated at various levels of government, and each federated entity contributes to the attainment of the overall objectives set for the government as a whole. According to the Stability Program adopted by Belgium for the years 2008-2011, this system of clear agreements on the results to be achieved at each level, couples with the delegation of responsibility to the various sub-sectors, ensures the success of fiscal policy and maximizes transparency.

The legal framework for the commitment or expenditure of public funds in Belgium is comprehensive and governed by openly available administrative rules, according to the ROSC. The Belgian Constitution (Articles 170-181) lays out the rules of the budget process. For instance, the Constitution stipulates that the process be annual and requires that the discussion of the budget be done in the public domain. Nevertheless, the ROSC notes that the Belgian budget process and legal framework are complex and, while open to the public, not transparent for non-experts. In May 2003, the Belgian parliament passed a new budget management bill to simplify the budget process and to make it more transparent. For instance, the legislation calls for the creation of internal audit units in departments and agencies. It is expected that the law will come into full force during 2008-2010.

The ROSC states that all taxes in Belgium are based in law and that tax legislation is generally accessible and well-publicized. For instance, Articles 170 and 172 of the Belgian Constitution require that taxes be imposed and reduced through a legislative act. Article 171 mandates that taxes be voted on an annual basis and that the rules regarding such taxes be updated every year. All tax laws and legislation have been codified and posted on a special Ministry of Finance website, replete with background information to facilitate interpretation of legislation. However, even though an initiative to simplify Belgian tax legislation is underway, it is still considered complex for lay persons and experts alike.

According to the ROSC, Belgium provides the public with comprehensive and readily available information on the past, current, and projected fiscal activity of each level of government, and there is a clear commitment to improve the timely provision of information. All tiers of government have made substantial efforts to develop web-based access to fiscal information, importantly through the websites of the Ministries of Finance and the Budget. Furthermore, the ROSC notes that budget documents offer comprehensive detail on central government activities and provide summary data on the general government, such as the overall deficit, expenditures, and revenues. This practice far exceeds fiscal policy transparency standards.

Belgium's budget preparation, execution, and reporting process is open and broadly consistent with international standards. The requirement to publish fiscal data in budget and final accounts documents on an annual basis is established by law for the various levels of government. Legislation also specifies the dates, or ultimate dates, at which these documents should be provided. Fiscal data is provided on a regular basis to the European Union (EU), in the context of fiscal coordination and the excessive deficit procedure under the Maastricht Treaty and the 1995 European System of Accounts (ESA95) regulation, and to the European Central Bank (ECB). Also, the IMF ROSC states that Belgium provides independent assurances of integrity regarding budget data, adding that budget data are reasonably reliable and publicly available. Furthermore, Belgium's fiscal information is subject to independent scrutiny. For instance, Belgium's external audit is fully independent and spans all public sector activities except at the municipal level. Article 180 of the Constitution established the Court of Audit, which scrutinizes the fiscal, accounting, and financial operations of the different arms of government. The independent Federal Planning Bureau conducts the external scrutiny of macroeconomic models and economic projections.

According to the IMF's 2008 Article IV Consultation, fiscal consolidation is at the forefront of Belgium's comprehensive strategy to address the projected rise in costs arising from its ageing population, which is expected to raise public expenditures by 6 percent points of GDP by 2050. The absence of fiscal consolidation means that the public-debt-to-GDP ratio is projected to move onto an unsustainable path. Articulated by the High Finance Council, this strategy will build surpluses gradually and will use savings from lowering public debt to finance cost related to ageing. To accomplish sustainable fiscal consolidation, the Article IV Consultation recommends that Belgium refocus its fiscal framework on a medium-term path. In turn, successful medium-term adjustment will ultimately lead to greater accountability, more transparency, and stronger coordination among government entities.

The Principles

Clarity of roles and responsibilities.

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According to the 2008 IMF ROSC, the roles and responsibilities of the Belgian budget process are clear and well-defined. However, the ROSC does not specifically address Belgium's compliance level with this principle. In terms of the structure and functions of government, the Belgian Constitution and the ESA94 clearly set Belgium's four main government sectors apart from the private sector. Furthermore, Belgium has a complex administrative structure in which fiscal policy is coordinated at various levels of government, and each federated entity contributes to the attainment of the overall objectives set for the government as a whole. According to the Stability Program adopted by Belgium for the years 2008-2011, this system of clear agreements on the results to be achieved at each level, couples with the delegation of responsibility to the various subsectors, ensures the success of fiscal policy and maximizes transparency.

The ROSC observes that Belgium's mechanisms for the coordination and management of budgetary and extra-budgetary activities is reasonably well-defined and transparent. A shining example is the social security sector, which comprises 40 percent of government spending. To augment transparency, the budgets of the social security institutions are publicly discussed with all stakeholders before being approved by their supervising boards and Minister. In Belgium, the relationships between government and non-governmental public sector agencies like public non-financial and financial institutions are clearly defined, and the ROSC notes that, since the privatization of several major government-owned financial institutions in the 1990's, government participation in the financial sector has been markedly reduced. Furthermore, a 1991 law governing public economic enterprise established a special governance regime for major non-financial enterprises that are majority-owned by the federal government. Nevertheless, the ROSC states that the reporting of government holdings in corporations is not very transparent, citing the fact that government equity participations are not clearly reported in the budget documentation. In addition, the independence of the National Bank of Belgium (NBB) from government is rooted in the 1998 central bank law, which stipulates that the NBB has only an advisory role in fiscal matters.

In regard to government involvement in the private sector, the ROSC notes that laws and processes governing the regulation of the non-financial private sector are clear and open, overall. For example, the regulations addressing government involvement in the private sector are clearly and thoroughly documented on the websites of several government bodies, such as the Ministry of the Economy and the Ministry of Small and Medium-sized Enterprises. Furthermore, in the last several years, Belgium has introduced measures to facilitate information exchange between several government agencies. One such initiative is an e-government service that has had the dual effect of transacting with citizens and augmenting fiscal policy transparency. According to the ROSC, the Belgian government has increased its use of Public-Private Partnerships (PPPs) to finance public investments. This is problematic, because Belgian PPPs lack a clear legal and operational framework, and there is no reporting on PPPs in the budget documentation.

The legal framework for the commitment or expenditure of public funds in Belgium is comprehensive and governed by openly available administrative rules, according to the ROSC. Articles 170 through 181 of the Belgian Constitution lay out the rules of the budget process. For instance, the Constitution stipulates that the process be annual and also requires that the discussion of the budget be done in the public domain. Nevertheless, the ROSC notes that the Belgian budget process and legal framework are complex and, while open to the public, not transparent for non-experts. In May 2003, the Belgian parliament passed a new budget management bill to simplify the budget process and to make it more transparent. For instance, the legislation calls for the creation of internal audit units in departments and agencies. It is expected that the law will be fully implemented during 2008-2010.

The ROSC states that all taxes in Belgium are based in law and that tax legislation is generally accessible and well-publicized. For instance, Article 170 and Article 172 of the Belgian Constitution require that taxes be imposed and reduced through a legislative act. Article 171 mandates that taxes be voted on annually and the rules regarding such taxes must be updated every year. All tax laws and legislation have been codified and posted on a special Ministry of Finance website, replete with background information to facilitate the interpretation of legislation. However, even though an initiative to simplify Belgian tax legislation is underway, the law is still considered complex for lay persons and experts alike. New tax policy initiatives at the federal level are presented to the public and discussed during overall budget processes.

While Belgium has no comprehensive code of ethical behavior for civil servants, aspects of this are addressed by several laws and the jurisprudence of the High Administrative Court. For example, a royal decree of 1937 governs the basic rights and duties of federal civil servants, including ethical behavior. The Belgian government believes this law to be sufficient for tackling corruption. In August 2007, the government published the basic principles of a code of conduct for civil servants. However, the current codes do not explicitly address conflict of interest or set limitations on political activities.

Open budget processes

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According to the 2008 IMF ROSC, Belgium's budget preparation, execution, and reporting process is open and its presentation broadly consistent with international standards. However, the ROSC does not specifically address Belgium's compliance level with this principle. The budget process is determined by a multi-year coalition agreement that details the key expenditure and fiscal policy targets. Also, budget forecasts and macroeconomic assumptions are clearly presented in the Federal Planning Bureau's "economic budget," which is well publicized. The ROSC notes that statements on medium-term fiscal policy and fiscal risks are included in the budget documents. While the sensitivity of budget estimates to changes in economic variables is not included in budget documents, it is assessed independently for the European Commission. Regarding accounting and reporting on budget execution, the ROSC states that budget and fiscal reporting covers all sectors of government and is frequent. However, fiscal statistics and audit reports are produced with some lag.

The ROSC cites numerous areas in which Belgium's budget preparation, execution, and reporting regime can be improved. For instance, the lack of a single accounting standard within and between different levels of government complicates budget planning, execution, and reporting. Another major deficiency in the budget process and its supporting documentation is the lack of well-defined performance orientation. In its absence, it is unclear what government expenditure aims to achieve and when it has achieved certain goals. A perhaps even more fundamental weakness of the budget preparation process is the lack of quality of the multi-year projections. At the federal level, relatively detailed multi-year expenditure and revenue projections are presented in the general statement included in the budget documents, but the expenditure estimates are still based on macro-projections and extrapolation rather than the costing of individual expenditure items, and may reflect policy targets rather than projections.

Public availability of information.

II

The 2008 IMF ROSC states that Belgium provides the public with comprehensive and readily available information on the past, current, and projected fiscal activity of each level of government, and there is a clear commitment to improve the timely provision of information. However, the ROSC does not specifically address Belgium's compliance level with this principle. Belgian law requires publishing budgets, final accounts, and in-year budget reports. All tiers of government have made substantial efforts to provide web-based access to fiscal information, importantly through the websites of the Ministries of Finance and the Budget. Furthermore, the ROSC notes that budget documents provide comprehensive detail on central government activities and provide summary data on the general government. For example, the budget details fiscal aggregates, such as the overall deficit, expenditures, and revenues, and this practice far exceeds fiscal policy transparency standards.

Regarding past and forecasted fiscal data reporting, the ROSC observes that budget documentation discloses the main fiscal aggregates for the two years prior to the budget year and three years beyond the budget year. While this practice satisfies IMF standards, it is important to note that Belgium's multi-year projected figures are merely political targets and do not represent a baseline of expenditure. Furthermore, it is not explained how these political targets are to be achieved.

The requirement to publish fiscal data in budget and final accounts documents annually is established by law for the various levels of government. The legislation also specifies the dates, or ultimate dates, on which these documents should be provided. Fiscal data is provided on a regular basis to the EU, in the context of fiscal coordination and the excessive deficit procedure under the Maastricht Treaty and under the ESA 95 regulation, and to the ECB. Also, Belgium is a subscriber to the Special Data Dissemination Standard (SDDS) and meets SDDS specifications for coverage, periodicity, and timeliness of the data and for dissemination of advance release calendars. The information on the IMF SDDS website indicates that Belgium satisfies the conditions for access, integrity, and quality for most data categories.

Independent assurances of integrity.

II

The IMF ROSC states that Belgium provides for independent assurances of integrity regarding budget data, adding that budget data are reasonably reliable and publicly available. However, the ROSC does not specifically address Belgium's compliance with this principle. In terms of fiscal data meeting data quality standards, Belgium is a subscriber to the IMF's SDDS and meets SDDS specifications for the coverage, periodicity, and timeliness of the data and for dissemination of advance release calendars. The information on the IMF SDDS website indicates that Belgium satisfies the conditions for access, integrity, and quality for most data categories.

Furthermore, the ROSC states that Belgian fiscal information is subject to independent scrutiny. For instance, Belgium's external audit is fully independent and spans all public sector activities except at the municipal level. Established by Article 180 of the Constitution, the Court of Audit scrutinizes fiscal, accounting, and financial operations of the different arms of government. The independent Federal Planning Bureau conducts the external scrutiny of macroeconomic models and economic projections. However, while the reports of the external auditors are added to the budget documents and discussed in parliament, the ROSC points out that the legislature does not systematically follow-up on the audit findings. This means that a systematic tracking at the level of ministries and agencies does not take place.