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    Belgians refuse to invest their savings into stocks and bonds

    In the first quarter of this year, Belgians reduced their portfolio of listed shares by 200 million euro. At the same time, deposits grew by more than 5 billion euro, according to figures published by the National Bank of Belgium, this month.

    That is particularly remarkable because, as of this year, investment in stocks and bonds has become fiscally more advantageous. In the summer agreement last year, the government extended a deal to investors by making the first tranche of 627 euro of income from dividends tax exempt and at the same time halving the amount of savings interest exempt from tax. Theoretically that should have encouraged people to put their savings to work, namely to transfer money from a savings account to a securities portfolio.

    That this has not happened yet is not surprising. A savings account currently outperforms the stock market. While the savings rate is a negligible 0.11 percent, the Bel20 has fallen by 2.6 percent since the beginning of the year. Potential equity investors are deterred by this uncertain climate. Even dividends can not tempt them to sink their money into the stock market.

    This reluctance to invest is a setback for the government because it had counted on the payback effects of the the move from savings to securities. This has particular inplications for the government becaue the tax incentive for equity investors is an expensive matter. The budgetary cost of the extra exemption was initially estimated at 190 million euro on the basis of simulations by the National Bank, if the savings pattern of the average Belgian remained the same. However, Minister of Finance Johan Van Overtveldt (N-VA) thought that the cost could be limited to 61 million, if just 5 percent of the savings – approximately 12 billion – were  invested in shares. Based on that calculation the net cost price after payback effects would have been less than one third of the gross impact.

    When savings stay put, the government pays the price by collectine less revenue. Opposition party SP.A is concerned about the effects of the situation on the budget. Representative Peter Vanvelthoven fears that the measure will “cost three times more than predicted.” Instead of a measure to stimulate the activation of savings, the exemption is, according to him, a gift to existing shareholders. Vanvelthoven does not exclude the possibility that the cost price of the exemption will be higher than the proceeds of the controversial securities tax (ed. The Belgian Parliament on 1 February 2018 passed legislation introducing an annual tax at a rate of 0.15% on the value of certain securities accounts of individuals – both Belgian tax residents and non-residents). The government expected 254 million euro to flow into the federal coffers, but there is doubt about the attainability of that amount.

    Arthur Rubinstein
    The Brussels Times