The Taxation And Regulation Of Banks

The financial crisis has prompted a reconsideration of the taxation of financial institutions, with practice outstripping principle: France, Germany, the United Kingdom and several other European countries have now introduced some form of bank tax, and the U.S. administration has revived its own proposal for such a charge. This paper considers the structure, appropriate rate, and revenue yield of corrective taxation of financial institutions addressed to two externalities, consequent on excessive risk-taking, prominent in the crisis: those that arise when such institutions are simply allowed to collapse, and those that arise when, to avoid the harm this would cause, their creditors are bailed out. It also asks whether corrective taxation or a regulatory capital requirement is the better way to address these concerns. The results suggest a potential role for taxing bank borrowing, perhaps as an adjunct to minimum capital requirements, at marginal rates that rise quite sharply at low capital ratios (but are likely lower when the government cannot commit to its bailout policy), reaching levels higher than those of the bank taxes so far adopted or proposed.

Analytical and empirical perspectives on the interplay of taxation and regulation in the financial sector. The global financial crisis has prompted economists to rethink fundamental questions on how governments should intervene in the financial sector. Many countries have already begun to reform the taxation and regulation of the financial sector—in the United States, for example, the Dodd–Frank Act became law in 2010; in Europe, different countries have introduced additional taxes on the sector and made substantial progress toward a banking union for the eurozone. Only recently, however, has a new field in economics emerged to study the interplay between public finance and banking. This book offers the latest thinking on the topic by American and European economists. The contributors first explore new conceptual ground, offering rigorous theoretical analyses that help us better understand how tax policy and regulation can contribute to avoiding another crisis or reducing its impact. Contributors then investigate the behavior of financial institutions in response to various forms of taxation and regulation, offering empirical evidence that is vital for policy design. Contributors Thiess Buettner, Jin Cao, Giuseppina Cannas, Gunther Capelle-Blancard, Jessica Cariboni, Brian Coulter, Ernesto Crivelli, Ruud de Mooij, Michael P. Devereux, Katharina Erbe, Ricardo Fenochietto, Marco Petracco Giudici, Timothy J. Goodspeed, Reint Gropp, Olena Havyrlchyk, Michael Keen, Lawrence L. Kreicher, Julia Lendvai, Ben Lockwood, Massimo Marchesi, Donato Masciandaro, Colin Mayer, Robert N. McCauley, Patrick McGuire, Gaëtan Nicodème, Masanori Orihara, Francesco Passarelli, Carola Pessino, Rafal Raciborski, John Vickers, Lukas Vogel, Stefano Zedda

This concise book gives a unique overview of bank taxation as an alternative or a compliment to prudential regulation or non-revenue taxation. Existing bank taxation is reviewed with a view to eliminating distortions in the tax system, which have incen

Banks and the financial sector have come under increased scrutiny since the 2008 financial crisis. Regulations concerning the banking sector have been re-written and there have been calls for increased taxation of banks (as companies) and the remuneration of bankers. In general, two sorts of taxes are commonly mentioned, taxes on the profits of banks and taxes on bank wages. As the corporate tax may be borne by labor, a natural question to ask is whether the economic incidence of these taxes really differs. The cost of regulations can also be passed on, but public finance economists typically ignore the incidence of regulations, a potentially important source of influence for banks. This paper focusses on two questions. First, we ask whether there is an earnings premium in the financial sector. Second, we examine the issue of tax and regulatory incidence by estimating the degree to which banking regulations and company taxes on banks influence wages in the banking sector. We use individual data on wages combined with data from US states on the states' tax rates and timing of regulatory changes applied to financial corporations. We find (i) a raw 45% earnings premium in the financial sector; (ii) a negative effect of corporate tax on wages in the manufacturing sector but a positive or no effect on wages in the banking sector, and (iii) lower wages in the banking sector in states that de-regulated earlier. The tax incidence result is somewhat surprising though it is consistent with Huizinga, Voget, and Wagner (2011), who find that home country corporate income taxation of foreign-source bank income is almost fully passed through to higher interest margins charged abroad. The result may have to do with specifics of the banking industry such as market power, labor mobility, or inelastic demand and elastic supply of banking services.

Formerly titled, the Bank Tax Guide, the new U.S. Master Bank Tax Guide (2008) by noted bank tax expert, Ronald W. Blasi, J.D., LL.M., is a comprehensive desktop reference that covers all the tax rules for financial institutions and is the only book of its kind that is completely updated each year to reflect the latest changes through press time. This is the authoritative must-have guide for professionals charged with tax compliance for financial institutions. It features special planning sections in each chapter, detailed discussions that are meticulously referenced to authority for additional research, potential IRS audit activities, and numerous practical examples that illustrate the rules and principles. The volume provides informative discussions on points of law where the courts and the IRS may not see eye-to-eye.

This paper studies the impact of bank regulation and taxation in a dynamic model with banks exposed to credit and liquidity risk. We find an inverted U-shaped relationship between capital requirements and bank lending, efficiency, and welfare, with their benefits turning into costs beyond a certain requirement threshold. By contrast, liquidity requirements reduce lending, efficiency and welfare significantly. The costs of high capital and liquidity requirements represent a lower bound on the benefits of these regulations in abating systemic risks. On taxation, corporate income taxes generate higher government revenues and entail lower efficiency and welfare costs than taxes on non-deposit liabilities.

The debt crisis burst upon the world's attention in the summer of 1982 and has generated a great deal of discussion and debate. Most attention has been focused on schemes to solve the crisis, justifications for various forms of debt relief and reduction, and defenses of creditor positions. There has been substantial progress on a number of fronts in the debt crisis. One such example has been the substantial progress made in clarifying and refining the tax and regulatory environments for creditor banks in their own countries. The authors have organized the book with the summary material in the beginning: descriptions of the debt reduction operations and the responses of the commercial banks to them, with particular attention to the influences of the tax and regulatory environments faced in each jurisdiction. The latter part presents much more detail of each creditor country's regulations and is intended to serve as a reference. This book should be a valuable resource for further research and analysis of the debt crisis and the role played by the regulatory environment.

Taxing Banks Fairly offers an ethical perspective on bank taxation and financial stability to complement the traditional political economy approach. It also considers how a bank levy or financial activities tax, could be used to ensure that big banks m