EUROPE – The Dutch government has argued that the financial transaction tax (FTT) will set the country's pension funds back by "hundreds of millions" of euro a year, even though the Netherlands is not participating in the controversial tax.
The main reason for the cost is the broader scope of the revised proposals, now including the principles of place of residence of financial institution and place of issuance of financial product, according to Jeroen Dijsselbloem, the Dutch finance minister.
The minister said the government decided not to participate in the FTT as the revised proposals still do not exclude pension funds from the levy.
Fielding parliamentary questions from the Labour Party PvdA and Liberal Democrats D66, Dijsselbloem pointed out that, under the current proposals, every financial institution concluding a transaction with at least one party based in the FTT zone would be taxed.
A player from outside the FTT area would have to pay the tax to the FTT country in which the counter party was based, he said.
In addition, all transactions in financial products initially issued in the FTT zone would be taxed, according to the Dutch treasurer.
Dijsselbloem added that the Dutch regulator, De Nederlandsche Bank (DNB), estimated that – based on a 0.2% FTT tariff – trades in bonds and equities alone would cost the local financial sector at least €500m a year.
Almost half of this amount would come at the expense of pension funds, he argued.
In his opinion, the precise impact of the current proposals will be "very difficult" to forecast.
However, he predicted the number of transactions would decrease, that transactions would be moved to counterparties outside the tax area and that financial institutions would seek tax-free alternatives.
During the technical discussions of the revised proposals, he vowed to demand compensation for non-participating countries' administration costs.
He said he would also assess whether the tax proposal contravened the principle of free movement within the internal market, or competition among EU member states.
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