91997E0039

WRITTEN QUESTION E-0039/97 by Florus Wijsenbeek (ELDR) to the Commission (22 January 1997)

Subject: Restrictions on purchase of Belgian treasury bonds by residents of Belgium

Is the Commission aware that, since 28 February 1996, the Belgian Treasury has been issuing government bonds (with a five-year maturity) with a fixed interest rate in American dollars, with the restriction that residents of Belgium are not permitted to subscribe for them?

Does the Commission recall that it previously instituted proceedings against Belgium pursuant to Article 169 of the EC Treaty because in 1994 the Belgian State imposed a similar restriction on residents of Belgium in connection with a bond issue in German marks, which constituted a violation of Community law? Does the Commission agree that, in restricting the right of residents of Belgium to purchase government bonds, the Belgian State is violating Community law, irrespective of the currency in which the bonds are being issued?

If so, will the Commission urge the Belgian authorities to terminate immediately this unlawful and inadmissible conduct, in view, inter alia, of the fact that in 1995 they received a formal notification concerning a similar violation of Community law?

If not, can the Commission explain why it is permitting the Belgian State to violate Community law by retaining the restrictions on the right of residents of Belgium to purchase Treasury Eurobonds, despite the Commission's formal notice of complaint in 1995 in connection with proceedings pursuant to Article 169?

Answer given by Mr Monti on behalf of the Commission (11 April 1997)

The Commission is aware of the restrictions imposed by Belgian law on residents (except financial institutions) of Belgium wishing to subscribe to bonds in Deutsche Mark and, subsequently, in dollars, issued abroad by the Belgian Treasury. Such restrictions are incompatible with Community law on the free movement of capital and the Commission has initiated action under Article 169 of the EC Treaty in order to obtain their elimination.

In their reply, the Belgian authorities based the imposition of the restrictions on the need to ensure that residents of Belgium, subject to a withholding tax on interest income, do not escape the payment of tax by subscribing to the issues under question which were destined for investors not subject to withholding tax. They claimed, also, that the provisions in question are compatible with Article 73d, 1(a) of the EC Treaty which allows differential tax treatment of taxpayers in connection with their place of residence or place of investment.

The Commission considered the explanation by the Belgian authorities was not satisfactory, since the legitimate concern to ensure that no tax evasion takes place could be met by other means (e.g. through a declaration system) and not by measures restricting the free movement of capital. The Commission will therefore deliver to Belgium a reasoned opinion in the context of the procedure under Article 169 of the EC Treaty.