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Belgium Divided Over Savings Tax Reform

by Ulrika Lomas,, Brussels

17 December 2013

Belgian Finance Minister Koen Geens has published an article in support of his plans to reform the taxation of savings in Belgium, and lamenting opposition to the proposal from other governing parties.

Finance Minister Geens has advocated that the favorable tax regime currently benefiting savings account interest be extended, to include other types of capital income and investment products, notably shares and bonds. Savings account interest is exempt from withholding tax, up to a threshold of EUR1,880 (USD2,485).

According to, granting preferential tax treatment solely to interest income derived from savings is proving damaging for the Belgian economy, encouraging investors to place their money in savings accounts that are tantamount to "glorified current accounts." While mass savings are a fairly stable, and therefore important source of financing for the country's banks, the money does little to finance the economy, the online magazine reported.

Plans to extend the tax break to longer-term sources of financing, namely to savings bonds, term deposits, shares, and bonds, are vital not only for the banks, but also to businesses in Belgium, and indeed to the whole of the economy, argued, insisting that it is a "mistake" that savers who are prepared to take risks are subject to withholding tax at a rate of 25 percent, while savers taking the safe option are granted tax exemption. Ensuring that the taxation of capital income is placed on an equal tax footing is a step in the right direction, it made clear.

Furthermore, stressed that the favorable taxation of savings account interest merely leads to an excess of savings, with the result that the surplus flows abroad, benefiting Belgium's neighboring countries and competitors.

Concluding, welcomed the determination of Finance Minister Geens to close existing loopholes currently enabling savers to circumvent the limit of EUR1,880 via the use of multiple accounts. Under the Minister's plans, savers will have to chose in future between anonymity and the tax exemption. To qualify for the tax perk, savers will be required to authorize their banks to communicate the necessary information to the Belgian tax authorities, thereby ensuring that the exemption is accorded only once.

Given the opposition to his reform plans, Finance Minister Geens is reportedly considering the idea of postponing the envisaged changes until after the elections.

TAGS: compliance | Finance | tax | investment | business | tax compliance | Belgium | tax avoidance | interest | tax rates | withholding tax | tax breaks | tax reform | individual income tax

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