The Dutch parliament’s lower house approved raising taxes on banks and adding a levy on share buybacks in a surprise late night move aimed at helping lower-income households ahead of an election in November.
(Bloomberg) — The Dutch parliament’s lower house approved raising taxes on banks and adding a levy on share buybacks in a surprise late night move aimed at helping lower-income households ahead of an election in November.
The news sent bank shares sharply lower, with ABN Amro NV and ING Groep NV losing about 5%. It’s not clear that the motion, put forward by the opposition Green Left and Labor parties, will win over the Dutch senate, while the finance ministry is yet to evaluate its feasibility and may advise against it.
Still, the plan has added to concerns among investors that European banks face stiffer taxes as governments look to fund support for lower-income households that are being squeezed by inflation. The announcement is similar to a windfall tax on bank profits planned by the Italian government. On Thursday, Hungary’s Finance Minister Mihaly Varga said he’s also considering raising taxes on banks to close a budget gap.
The Dutch motion was approved by a majority of lawmakers late Thursday, who pledged to use some of the proceeds toward raising the minimum wage. They estimated that adding a 15% tax to stock buybacks would raise €1.2 billion ($1.3 billion). The bank levy is projected to bring in an additional €350 million.
The proposal comes ahead of an election on November 22. Outgoing Prime Minister Mark Rutte’s cabinet collapsed in July amid infighting over migration policy. Rutte’s subsequent decision to leave politics has created a political vacuum in the country, with several possible contenders vying to take over from the Netherlands’ longest-serving premier.
What Bloomberg Intelligence Says:
“The Dutch parliament’s proposed tax on share buybacks — set at the 15% rate applied to dividends — and raised banking levy are the latest in a string of tax-grab policies as governments seek to claw back some of the earnings boost lenders have enjoyed from interest-rate hikes.”
– Philip Richards, BI banking analyst
ING Groep NV shares sank 6% as of 2:10 p.m. in Amsterdam, the most since March. ABN Amro Bank NV’s decline of as much as 5.3% pushed it to its lowest level since December.
The Dutch finance ministry will send a letter about the expected consequences of the motion to the parliament before Oct. 4, when these plans will be discussed again, a spokesperson said by phone.
ING is following the developments while the proposal is under discussion, a spokesperson said. An ABN Amro spokesperson didn’t immediately respond to a request for comment.
The Netherlands Association of Bankers, or NVB, blasted the proposal.
“It is naive to think that society will benefit from this increase in taxes,” said NVB Chairman Medy van der Laan in a statement. “Higher costs for businesses also lead to higher costs for consumers. The house is playing with fire.”
Rutte also expressed his objections in parliament. He predicted that the tax would result in the flight of banks from the Netherlands, ultimately draining revenue from government coffers.
“This would lead to the departure of banks, we are convinced, to Frankfurt, for example,” he told lawmakers.
–With assistance from Thyagaraju Adinarayan.
(Updates with further details throughout)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.