European central bank chief Christine Lagarde has warned the Netherlands to be cautious about introducing an additional tax on bank profits from 2025, following a request from the Dutch finance ministry for the ECB’s opinion.
The plan, drawn up and backed by parliament rather rather than the ministry, envisages using the cash to pay for the increase in the minimum wage. However, Lagarde said in her report that the plan’s backers have not looked at possible market distortion or the effect on interest rates on credit if the tax goes ahead.
The tax aims to raise around €150 million a year, on top of the €470 million raised by the current levy on bank profits.
The ECB has not rejected the plan outright but warns that there may well be a knock-on effect on the financial system. For instance, banks may start avoiding the Netherlands because of the tax. “The draft proposal should be accompanied by a thorough analysis of potential negative consequences for the banking sector,” the report said.
This should be done “to assess whether its application poses risks to financial stability, and in particular whether it has the potential to impair the banking sector’s resilience and cause market distortion.”
The bank tax plan comes from a D66, PvdA-GroenLinks and ChristenUnie motion as a way of funding the increase in the minimum wage – which also impacts on state pensions and welfare benefits.
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