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.
  • Audio

    Audio

  • Pdf

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.

Kampeter dpa
Steffan Kampeter, state secretary in the Finance Ministry, says the treasury would have lost €160 million in 2013 and €210 million in 2012 had German banks been able to write off the E.U. fees. Source: DPA

 

Handelsblatt has been shown a copy of the ministry’s reply: “Without laying claim to completeness, I can inform you that apart from Germany, Cyprus is the only other country where it is impossible to deduct the bank tax,” wrote Steffen Kampeter, a senior ministery official.

“According to available information, the tax can be deducted in seven countries (Belgium, France, Spain, Ireland, Poland, Portugal and Sweden),” he continued.

So there is little hope in the finance ministry that bank tax deductions can be excluded throughout the European Union. There are two remaining possibilities: Either Mr. Schäuble holds fast to the German regulation, which would put domestic banks at a competitive disadvantage. Or German banks should be allowed to deduct the tax in the future, which would be expensive.

If the German bank tax had been deductible up to now, that would have meant a “purely mathematical” revenue reduction of €160 million, or about $207 million, for the German treasury in 2013, according to Mr. Kampeter’s document. For 2012, it would have cost €210 million.

This article was translated by George Frederick Takis. Greg Ring also contributed. To contact the author: hildebrand@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!