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Bonus Taxes and International Competition for Bank Managers

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  • Daniel Gietl
  • Andreas Haufler

Abstract

We analyze the competition in bonus taxation when banks compensate their managers by means of fixed and incentive pay and bankers are internationally mobile. Banks choose bonus payments that induce excessive managerial risk-taking to maximize their private benefits of existing government bailout guarantees. In this setting the international competition in bonus taxes may feature a ‘race to the bottom’ or a ‘race to the top’, depending on whether bankers are a source of net positive tax revenue or inflict net fiscal losses on taxpayers as a result of incentive pay. A ‘race to the top’ becomes more likely when governments’ impose only lax capital requirements on banks, whereas a ‘race to the bottom’ is more likely when bank losses are partly collectivized in a banking union.

Suggested Citation

  • Daniel Gietl & Andreas Haufler, 2017. "Bonus Taxes and International Competition for Bank Managers," CESifo Working Paper Series 6495, CESifo.
  • Handle: RePEc:ces:ceswps:_6495
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    Cited by:

    1. Andreas Haufler & Yukihiro Nishimura, 2020. "Taxing Mobile and Overconfident Top Earners," CESifo Working Paper Series 8550, CESifo.
    2. Gietl, Daniel, 2018. "Overconfidence and Bailouts," Rationality and Competition Discussion Paper Series 132, CRC TRR 190 Rationality and Competition.
    3. Gietl, Daniel & Haufler, Andreas, 2018. "Bonus taxes and international competition for bank managers," European Economic Review, Elsevier, vol. 110(C), pages 41-60.
    4. Gietl, Daniel & Kassner, Bernhard, 2020. "Managerial Overconfidence and Bank Bailouts," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 202-222.

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    More about this item

    Keywords

    bonus taxes; international tax competiton; migration;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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