Deduction Dilemma

European Bank Tax Could Cost Germany Dearly

tax dpa
A German tax form. If German institutions are allowed to write off an E.U. banking fee designed to protect the consumer, the population at large would end up paying.
  • Why it matters

    Why it matters

    If German banks cannot write off the European bank tax, as banks in many other E.U. countries can, then they would be at a competitive disadvantage. But if they do write it off, the tax would cost the treasury millions.

  • Facts

    Facts

    • Under the planned €55 billion ($71 billion) European bank tax, financial institutions would make provisions for possible future shortfalls.
    • The bank tax can be deducted in seven countries – Belgium, France, Spain, Ireland, Poland, Portugal and Sweden, according to the finance ministry.
    • The finance ministry estimates that if Germany’s national bank tax were deductible it would have reduced revenues by €160 million, or about $207 million, in 2013.
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    Audio

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For Wolfgang Schäuble, Germany’s finance minister, the European bank tax is actually a welcome undertaking. After all, there is widespread public appeal in the notion that European banks would make financial provisions for future shortfalls. And the primary goal of the planned €55 billion ($71 billion) restructuring fund is to protect taxpayers.

But Mr. Schäuble anticipates the project could cause a problem that might lead to some unpleasant debates. The sticking point is Germany’s own national bank tax, which has been in effect since 2011, and is not tax deductible. The reason: If it were deductible, German taxpayers would be indirectly paying the tax too.

Mr. Schäuble wanted this rule to apply throughout Europe as well. The only problem is that he is more or less isolated on this position. The parliamentary finance spokesman for Germany’s Left Party, Axel Troost, asked the finance ministry to specify which countries have rules similar to Germany’s.

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