The proposal for an excess profit tax would jeopardize the financing of the economy

Stay up to date with the latest measures from the financial sector

4 min Reading time

We have taken note of Vooruit's proposal to introduce an "excess profit tax" on banks, which would further burden the profits generated by banks. Febelfin deeply regrets this proposal, given the already significantly high level of contributions that banks currently pay. A strong banking sector is essential to support the economy and society. However, an additional tax burden would limit the societal role and impact that banks can have in supporting the economy, especially in times of crisis.  


The financial sector understands the expectations of customers who seek returns on their savings accounts, but the introduction of an additional tax on excess profits will not serve this purpose.


Significant financial contribution by banks to the budget

Currently, Belgian banks already make substantial contributions to public finances and the operation of the financial system. For 2022, the total amount can be estimated at 3.6 billion euros. In addition to "standard" taxes and levies (corporate tax, social contributions, etc.), the Belgian financial sector annually pays several specific taxes not imposed on other sectors. These include the Annual Tax on Credit Institutions (ATCI - 13 basis points), the contribution to the Deposit Guarantee Scheme (DGS - 10.5 basis points), and the contribution to the Single Resolution Fund (SRF - 10 basis points). This totals about 1.6 billion euros in 2022.

These contributions, except for the SRF contribution, go directly to the budget. Thus, the contributions to the DGS, which are intended to protect savings, also serve to fund the budget in Belgium.

An additional tax on net interest income and net commission income of banks as a budgetary effort would constitute a fourth tax on savings deposits and regular retail banking activities. How many times can the same savings deposit be taxed?


European competitiveness under pressure

A comparison with neighboring countries shows that Belgian banks pay significantly higher taxes and charges than their European counterparts. Therefore, an additional profit tax proposal raises serious concerns at Febelfin regarding the competitiveness of the Belgian financial sector in the European and international context.

This is not to mention that the profits of Belgian banks are not significantly higher than the profitability of banks in other European countries. Belgian banks are simply in the middle, actually in the second half, of the European rankings. Furthermore, the ECB is urging European banks to further strengthen their profitability to face future major challenges. That is why it reacted very negatively to similar initiatives taken in Italy and Spain before. Such concerns are justified, given the significant market shocks caused by these initiatives and their major impact on small investors. It is worth noting that each European banking sector has its own specific characteristics. In Spain, for instance, lending mainly takes the form of variable-rate loans; therefore, interest income is not fixed long-term.


Support for the economy Is compromised

Belgian banks have always been ready to fully support the economy, even in times of crisis. During the COVID crisis, they continued to provide loans and helped individuals and businesses facing financial difficulties. During that period, banks granted payment deferrals totaling 13 billion euros for individuals and 24 billion euros for businesses. With the energy crisis, Belgian banks have reiterated their societal commitment.

To continue playing this role in times of economic crisis and uncertainty, a strong and healthy banking sector is necessary. Additional taxes reduce the capacity of banks to support our economy. In this regard, the potential impact on lending to businesses and households should not be underestimated and could seriously harm the Belgian economy.

Financial institutions must also have sufficient capacity to absorb shocks and meet future challenges, including their significant role in financing the transition to a more sustainable society. Substantial investments will be needed to assist citizens and businesses in making this sustainable transition.

Belgium needs healthy, stable, and profitable banks if we want the Belgian banking sector to remain characterized by locally anchored banks, serving customers and society, and supporting the entire Belgian economy.