Cabinet agrees with introduction bank tax

On the proposal of Minister De Jager and State Secretary Weekers of Finance, the Cabinet has agreed to send the legislative proposal for a bank tax to the Lower House of Parliament.

The government was recently forced to invest to a considerable degree in the stability of the banking sector in the Netherlands. Although the support was granted to a limited number of banks only and a large number have meanwhile paid back these capital injections with interest, one should not lose sight of the reason for the support. The State did not give the support in the context of the credit crunch with the intention to help one specific bank but to ensure financial stability. Thereby the entire banking sector has profited from the support given by the State. As a result, the government deems it fair that the entire banking sector contributes in the form of a bank tax.

In giving substance to the tax, the tightened capital requirements (of Basel III) and the deposit guarantee scheme have been taken into account. By deducting both the capital and the deposits covered by the deposit-guarantee scheme from the total of all liabilities on the balance sheet, the bank tax is levied over the remaining liabilities, i.e. the bad debts. As a result of this design, the accumulation of measures on the liabilities side is avoided.

At the same time, an incentive is included in the bank tax so as to stimulate long-term financing, which can further promote the stability of the financial system in the Netherlands. A rate of 0.022 percent will be levied on the short-term debts. A rate of 0.011 percent will become effective for the long-term debts.

In addition, the Cabinet wishes to contribute with this bank tax to the combating of perverse incentives in remuneration policies. That is the reason why it has tried to find a connection with the norm from the Banking Code in which the variable remuneration of a managing director should not exceed 100 percent of the fixed remuneration. As soon as this norm is exceeded, the rates of the bank tax will be multiplied by a factor of 1.05. This measure does justice to the idea behind the motion of Mr Van Vliet.

After the debates in both Houses of Parliament, the legislative proposal will become effective by Royal Decree at a date still to be fixed. The Cabinet strives for an effective date mid 2012, but by choosing an 'open' effective date it wishes to create room, so that a keen eye can be kept on the developments on the financial markets. In addition, the Cabinet can keep an eye on a possible confluence with European initiatives. In principle, there should be no accumulation of similar taxes.