The European Commission’s controversial financial transaction tax (FTT) will set Dutch pension funds back by at least €250m every year, even though the country has chosen not to participate in the tax, according to finance minister Jeroen Dijsselbloem.
In a letter to Parliament, Dijsselbloem pointed out the difficulty of measuring overall costs at this time and warned that the financial burden could actually be much higher.
Referring to the calculations of regulator De Nederlandsche Bank (DNB), Dijsselbloem said the loss for pension funds would take at least a quarter of a percentage point off their returns, and come at the expense of coverage ratio and pensions.
He said the DNB had only taken equity and bond transactions into account, which are to incur a 0.1% FTT levy if they have been issued in the FTT zone, or are traded within the area.
The FTT zone is likely to comprise all EU countries except the Netherlands, the UK, Luxembourg, Malta and the Czech Republic.
The DNB excluded derivatives and repos from its calculations, as it assumed the trade would move out of the FTT area, Dijsselbloem said.
The European Commission is intending to tax each derivatives transaction by 0.01%.
The minister suggested that falling demand for derivatives, or the extension of duration triggered by the FTT, could lead to pension funds failing to fully hedge their financial risks.
The so-called Tobin tax could also hit Dutch pension funds indirectly, the Treasury warned, as middlemen and clearing members could pass on FTT costs.
In Dijsselbloem’s opinion, the introduction of the tax could also reduce liquidity on financial markets, and possibly increase the bid-ask spread and transactions costs.
Even an FTT exemption for pension funds would be unlikely to counter this effect, he said.