Facing rising public debt, growing pension and healthcare costs, and continued pressure from European fiscal rules, the Belgian government is under increasing strain to strengthen its public finances.

To address these structural budget deficits, policymakers are exploring new and more sustainable revenue sources. One of the most significant proposals is the 2026 capital gains tax, which would target profits from the sale of shares and other investment products to generate additional, recurring income for the state.

As Belgium moves closer to implementing this measure, an important question arises: what can we expect? Is it the right time to implement this new tax or will it just fuel the perfect storm? To answer that, history provides valuable perspective.

Introducing capital gains taxation by governments is not unique – they’ve been observed repeatedly across countries.

 

Country Reform Immediate Market Reaction Post-Implementation Effect Key Behavioral Insight
United States 1986 Tax Reform Act (capital gains rate increase) Surge in realized gains before higher rate took effect Sharp decline in realizations afterward Classic lock-in effect; strong tax-timing response
Canada 1972 Introduction of Capital Gains Tax Increased selling before implementation Lower portfolio turnover post-introduction Clear tax-motivated timing behavior among retail investors
Finland 1993 Capital Income Tax Reform Acceleration of realizations before reform Persistent reduction in sales after reform Strong household-level lock-in effects
India 2018 Reintroduction of Long-Term Capital Gains Tax (LTCG) Elevated volatility around announcement; pre-implementation selling pressure Short-term liquidity distortions Announcement effects matter as much as implementation
Croatia Introduction of Capital Gains Tax (European case) Trading spike before implementation 20%+ average volume decline in subsequent years Clear liquidity impact in a retail-sensitive market

 

When comparing recent cases, the pattern is strikingly consistent; across markets we can clearly notice:  

  • Investors accelerate sales before tax increases 
  • Trading moderates afterward 
  • Retail-driven markets show the strongest effects 

n depth studies from Blouin, Raedy & Shackelford and a European study from Gniadkowska-Szymańska & Gubareva all confirm that a capital gains tax encourages private investors to postpone the sale of securities with a capital gain (lock-in effect) and that this behavior leads to a decrease in transaction volume and lower portfolio turnover, especially in the short and medium term.

Furthermore, analysis from Belgian banks and tax advisory firms also confirms (be it more cautiously) that the capital gain tax is an incentive to change trading behavior and, as the tax only applies to realized capital gains, it encourages holding on to securities instead of regular reallocation.

This is amplified by the annual exemption (€10,000) which encourages tax planning of sales, possibly concentrated on a limited number of transactions per year.

Adding another layer of complexity is the current global geopolitical tensions – from energy crises to international conflicts, import tariffs, and the new war in the Middle East.

All these elements are increasing market volatility and shaping investment decisions.

For policymakers, understanding these domestic and global dynamics is essential to design taxation policies that are fair, efficient, and resilient, while still ensuring that those with substantial financial resources contribute their share to society.

Another important point to consider is that Belgium doesn’t have the best reputation when it comes to implementing new investment taxes.

We all remember the 2017 tax on securities accounts. When comparing the historic outline of the 2017 tax implementation, we see many similarities.

Both taxes were highly controversial from the outset and subject to numerous constitutional challenges brought by taxpayers and political parties.

This eventually led to the annulment of the securities accounts tax in 2019 by the Belgian Constitutional Court, which ruled that the tax violated the principles of equality and non-discrimination in the Belgian Constitution due to uneven treatment of financial instruments, differential treatment based on registration, and tax avoidance loopholes.

In a recent LinkedIn post, Vincent Van Quickenborne highlighted the current political impasse and urged the administration to do better than in 2017.

The delayed passage of the law is also creating uncertainty. Like in 2017, the law was initially supposed to take effect in January, but has now been postponed to March 11th.

This delay increases temporal ambiguity for investors and raises questions about potential retroactivity.

Even though Jan Jambon continues to steer the reform process, the situation clearly signals political misalignment, which markets tend to interpret negatively.

Finally, investor behavior will not be uniform.

Psychology matters.

Broadly speaking, investors can be divided into two main categories.

The first category consists of small investors, who typically buy and hold securities and therefore already have limited trading activity.

These investors will most likely optimize their trading behavior to stay under the annual tax exemption limit of €10,000.

The second category consists of active investors, who actively seek market opportunities and generate higher trading volumes.

For them, any additional tax on transactions will likely trigger the predicted behavioral response, potentially reducing trading activity.

This dynamic could also place greater competitive pressure on trading platforms, forcing them to remain attractive through broker fees and advisory services.

For asset managers, it may create an opportunity to develop more ETFs and investment funds, especially for investors who prefer avoiding the administrative burden of tracking capital gains while still optimizing their portfolios without excessive trading.

All these elements point toward increased uncertainty and pressure on financial markets.

And ultimately, this uncertainty will influence retail investors’ decisions.

Will they fight, flight… or freeze?