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On the Incidence of Bank Levies: Theory and Evidence

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  • Kogler, Michael

Abstract

Several European countries have recently introduced levies on bank liabilities to internalise the fiscal costs of banking crises. This paper studies the tax incidence: Building on the Monti-Klein model, we predict that banks shift the burden to borrowers by raising lending rates and that deposit rates may increase as deposits are partly exempt. Bank-level evidence for 23 EU countries in the period 2007-2013 implies a moderate increase in lending and deposit rates and net interest margins. Market characteristics and capital structure influence the magnitude: The lending rate strongly increases in concentrated markets, whereas the pass-through is weak for well-capitalised banks.

Suggested Citation

  • Kogler, Michael, 2016. "On the Incidence of Bank Levies: Theory and Evidence," Economics Working Paper Series 1606, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2016:06
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    Cited by:

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    2. Ulrich Haskamp, 2018. "Spillovers of banking regulation: the effect of the German bank levy on the lending rates of regional banks and their local competitors," International Economics and Economic Policy, Springer, vol. 15(2), pages 449-466, April.
    3. Karolina Puławska, 2021. "The Effect of Bank Levy Introduction on Commercial Banks in Europe," JRFM, MDPI, vol. 14(6), pages 1-26, June.
    4. Bremus, Franziska & Schmidt, Kirsten & Tonzer, Lena, 2020. "Interactions between bank levies and corporate taxes: How is bank leverage affected?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 118.
    5. Mariusz Kapuściński, 2022. "The consequences of the bank levy in Poland," NBP Working Papers 346, Narodowy Bank Polski.
    6. Richard M. Bird, 2018. "Are global taxes feasible?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(5), pages 1372-1400, October.
    7. Karolina Puławska, 2022. "Taxation of the financial sector: Is a bank levy the answer to the financial crisis?," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(4), pages 390-404, December.
    8. Josef Schroth, 2021. "On the Distributional Effects of Bank Bailouts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 252-277, April.
    9. Andrzej Karpowicz & Zbigniew Korzeb & Paweł Niedziółka, 2022. "Macroeconomic and sectoral specific determinants of bank levies’ inflows in European Union," Bank i Kredyt, Narodowy Bank Polski, vol. 53(2), pages 183-202.
    10. Bremus, Franziska & Schmidt, Kirsten & Tonzer, Lena, 2018. "Interactions between regulatory and corporate taxes: How is bank leverage affected?," IWH Discussion Papers 16/2018, Halle Institute for Economic Research (IWH).
    11. Chronopoulos, Dimitris K. & Sobiech, Anna L. & Wilson, John O.S., 2019. "The Australian bank levy: Do shareholders pay?," Finance Research Letters, Elsevier, vol. 28(C), pages 412-415.
    12. Hryckiewicz Aneta & Puławska Karolina, 2022. "How to Design a Bank Levy: The Effect of a Levy Scheme on Bank Performance and its Activities," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 30(3), pages 136-174, September.

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    More about this item

    Keywords

    Taxation of banks; Tax Incidence; Pigovian taxes;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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