"We have no intention to start some sort of 'race to the bottom'," said Schäuble about plans by Britain's finance minister George Osborne to slash corporation tax to avoid a business exodus after the June 23 Brexit vote.
At a regular government news briefing, Schäuble noted that Osborne was expected to present his plans to his European counterparts at next week's ECOFIN meeting of finance ministers in Brussels.
Osborne "made the announcements and I hope he'll elaborate" on them, the German minister said, recalling the EU's drive in recent years to try and harmonise taxes across the bloc.
"We're not opposed to fiscal competition," he said, but it has to be "fair", he added.
Generally speaking, the shock vote in Britain to quit the EU was not expected to torpedo Germany's economic recovery, Schäuble continued.
"At the moment, we're not observing any negative effects on the German economy," he said. "But we'll see if that remains the case."
Schäuble was presenting his 2017 budget, with the public finances of Europe's biggest economy projected to be in the black for the third year in a row.
Berlin is planning to keep its budget balanced or in surplus at least until 2020.