At a meeting held on Wednesday the Federal Cabinet has decided that the 1-year government bonds that will be issued next month will be subject to the standard 30% rate of withholding tax. The last time the Public Debt Agency released 1-year bonds, in summer 2023, it was decided that investors would enjoy a reduced rate of 15% on the interest accrued.
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No reduced rate of withholding tax on investments in new 1-year government bonds release
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As well as raising money to help finance the public debt the aim of last summer’s bonds release was to force the banks to increase the interest they pay to savers, an aim that has at least to some extent been reached.
With 30% witholding tax being levied, investors in the new bonds will receive a net rate of interest of 2.1%. The rate of withholding tax to be levied on the bonds has been a source of heated debate between the Flemish Christian Democrats and their liberal coalition partners in the Federal Government.
The Federal Finance Minister Vincent Van Peteghem (Flemish Christian democrat) wanted a 15% rate of withholding tax to be levied as was the case last summer. However, the Federal Secretary of State responsible for the Budget Alexia Bertrand (Flemish liberal) opposed this as it would lead to less income for the exchequer.
With some banks now offering more than 2.1% interest to savers it remains to be seen whether the new bonds release with be anything like as popular as the bonds release in the summer of last year.