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Avoiding Taxes: Banks' Use of Internal Debt

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  • Reiter, Franz

Abstract

This paper investigates how banks use internal debt to shift profits to lower taxed affiliates. Using regulatory data on German multinational banks I find that banks employ the debt shifting channel more aggressively than non-banks do. This becomes even clearer when I correct for conduit entities in internal debt financing: A ten percentage points higher corporate tax rate increases the internal net leverage by 5.63 percentage points, corresponding to an 18% increase at the mean.

Suggested Citation

  • Reiter, Franz, 2017. "Avoiding Taxes: Banks' Use of Internal Debt," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168115, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168115
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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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