New Government Bond Rates and Tax Debate: Impact on Savers and Best Investment Options

2024-02-20 20:16:00

The Debt Agency has communicated the rates for the new 1 and 3 year government bonds. For the first, a rate of 3% gross is announced while the 3-year government bond will be awarded a rate of 2.5% gross. This new issue, whose subscription period will run from Thursday February 22 to Friday March 1 inclusive, however remains surrounded by uncertainty concerning the withholding tax which will be applied to the 1-year government bond.

Finance Minister Vincent Van Peteghem (CD&V) is pushing for the reintroduction of a favorable tax rate, as for the September 2023 state bond. A reduction in withholding tax from 30 to 15% which, taking into account a gross rate of 3.3%, aroused great enthusiasm among savers. The government had managed to raise a record amount of 22 billion euros.

According to Prime Minister Alexander De Croo, however, there is little chance that a withholding tax lowered to 15% will be applied once more for this subscription. “There is no agreement on this point within the government today, and the budget is the subject of a negative opinion,” the Prime Minister repeated on Radio 1 Tuesday morning.

The gross yield of the new government bonds is fixed

And the debate is likely to be lively between Van Peteghem and Secretary of State for the Budget Alexia Bertrand (Open Vld), whom the Minister of Finance accuses of being in cahoots with the banks. To which the Secretary of State replied: “It’s a shame that you are turning a technical debate into a personal fight.”

Concretely, if a withholding tax of 30% is applied, the 1-year government bond will offer a net return of 2.1%. With a prime rate, the yield would rise to 2.55%. A notable difference which would make it possible to align with the best rates of savings accounts on the market, with the exception of Vision + from Santander (2.85%) and Vision Max (3%) and the growth account. Argenta, which offers 3% but with deposits limited to €500 per month.

Regarding term accounts, there is a way to find a better offer than the 1-year government bond. Izola indeed offers a gross rate of 3.35% gross, or a net return of 2.345%.

The enthusiasm of savers might therefore be boosted by a withholding tax lowered to 15% but it will not in any case reach that which we experienced last September. And for good reason, the Debt Agency limited the amounts raised by these two state bonds to 6 billion. If the subscription period extends until March 1, an early closing cannot therefore be ruled out.

The Minister of Finance tackles Alexia Bertrand on the new one-year state bond: “Irresponsible”
1708480965
#government #bond #good #deal