Additional levies for the financial sector undermine support for the economy
During the budget consultations, we have learnt that the government has decided to significantly increase banks’ contributions by partially abolishing the tax deductibility of Belgium’s annual tax on credit institutions (‘JKT’ or bank tax). Febelfin is extremely disappointed by this development because it believes that a strong banking sector is vital to support the economy and society. Increasing taxes will limit the social role banks can play and the clout they can carry in times of crisis.
While the financial sector is certainly willing to make a special effort in difficult economic times, and to assume its responsibility, a balance must always be maintained. This balance is now lacking.
Significant financial contribution from banks
Belgian banks already contribute considerably to public finances and to the functioning of the financial system. For 2021, the total amount can be estimated at €3.2 billion. Besides the ‘traditional’ taxes and levies (corporate income tax, social security contributions and so on), the Belgian financial sector pays several specific levies each year, including the annual tax on credit institutions (JTK), the deposit guarantee scheme (DGS) contribution and the contribution to the Single Resolution Fund (SRF). These levies totalled around €1.5 billion in 2021.
The government has now reportedly decided to partially abolish the tax deductibility of Belgium's annual tax on credit institutions (JTK). This significantly increases the levies that banks will have to pay each year.
A comparison shows that Belgian banks already pay significantly higher contributions and charges than our neighbouring countries. Febelfin is thus hugely concerned about the Belgian financial sector’s competitiveness in a European and international context.
Support for the economy is at risk
Belgian banks have consistently stood ready to fully support the economy in times of crisis. Indeed, during the Covid crisis, banks continued to extend credit and assisted businesses and households that encountered financial difficulties. Banks granted payment deferrals of €13 billion to individuals and €24 billion to businesses of their own accord over that period.
And Belgian banks are once again showing their social commitment during the energy crisis. The sector has taken the initiative to offer a deferral of principal payments on loans to households experiencing financial hardship because of soaring energy prices. The banks provide a customised solution for businesses. Businesses experiencing problems are encouraged to speak to their banker to see what individual solutions are possible.
But to continue playing this role in times of economic crisis and uncertainty, the banking sector needs to be strong and healthy. Additional levies reduce the banks’ clout to support our economy. The potential impact on lending to businesses and households should not be underestimated. After all, with an amount of €100 million, banks can lend for about €2 billion.
Banks also need to have sufficient capacity to absorb shocks and rise to the challenges of the future, including the vital role financial institutions play in funding the transition to a more sustainable society.
Given the challenging economic times, the financial sector is certainly ready to go the extra mile, but these measures reduce the banks’ capacity to provide the necessary oxygen to businesses and households.