The Ability of Banks to Shift Corporate Income Taxes to Customers
AbstractIn the context of the financial crisis, many projects of bank levies have emerged. Yet, there is very little evidence on the incidence of bank taxes and, hence, it is not clear who will bear the burden of the new taxes. In this paper, we investigate the ability of banks to shift corporate income taxes to their clients and we consider whether tax incidence is influenced by market competition and banks’ market power. Our sample consists of 1,411 European commercial banks over the period 1992-2008. To measure competition we rely on a large number of indicators, such as banks’ market share, the Herfindhal index, the Lerner index and the Panzar and Rosse h-statistic. We find that even in uncompetitive markets banks are not able to shift corporate income taxes to their customers. Our results contradict earlier papers that find a significant pass-through, and we argue that previous studies suffer either from endogeneity problems or from the wrong specification of the tax burden.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2013-09.
Date of creation: Feb 2013
Date of revision:
Bank taxation; Bank levy; Net interest margin; European banks; Banking; market structure; Corporate tax incidence;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-03-23 (Accounting & Auditing)
- NEP-ALL-2013-03-23 (All new papers)
- NEP-BAN-2013-03-23 (Banking)
- NEP-PBE-2013-03-23 (Public Economics)
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