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European Banks and Tax Havens: Evidence from Country-by-Country Reporting

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  • Petr Jansky

    () (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)

Abstract

Banks in the European Union recently started publicly reporting data on profit, number of employees, turnover and tax on a country-by-country basis. I introduce the largest, hand-collected data set of its kind, which covers almost 50 banks for up to 5 years between 2013 and 2017. I identify the main locations of European bank's profits, which include the largest European economies as well as tax havens. I focus on answering the question of how geographically aligned these profits are with economic activity. I find that some of the tax havens have maintained high shares of profits in contrast with their much lower shares of employees. These results indicate that banks are likely shifting their profits to tax havens, but for the profit shifting to be directly observed, regulators will need to ask banks to publish even better data.

Suggested Citation

  • Petr Jansky, 2018. "European Banks and Tax Havens: Evidence from Country-by-Country Reporting," Working Papers IES 2018/38, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2018.
  • Handle: RePEc:fau:wpaper:wp2018_38
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    File URL: http://ies.fsv.cuni.cz/default/file/download/id/32323
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    References listed on IDEAS

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    1. Demirgüç-Kunt, Asli & Huizinga, Harry, 2001. "The taxation of domestic and foreign banking," Journal of Public Economics, Elsevier, vol. 79(3), pages 429-453, March.
    2. Dutt, Verena Katharina & Ludwig, Christopher Alexander & Nicolay, Katharina & Vay, Heiko & Voget, Johannes, 2018. "Increasing tax transparency: Investor reactions to the country-by-country reporting requirement for EU financial institutions," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181537, Verein für Socialpolitik / German Economic Association.
    3. Niels Johannesen & Gabriel Zucman, 2014. "The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 65-91, February.
    4. Dominika Langenmayr & Franz Reiter, 2017. "Trading Offshore: Evidence on Banks' Tax Avoidance," CESifo Working Paper Series 6664, CESifo Group Munich.
    5. Zhiguo He & Asaf Manela, 2016. "Information Acquisition in Rumor-Based Bank Runs," Journal of Finance, American Finance Association, vol. 71(3), pages 1113-1158, June.
    6. Scott D. Dyreng & Jeffrey L. Hoopes & Jaron H. Wilde, 2016. "Public Pressure and Corporate Tax Behavior," Journal of Accounting Research, Wiley Blackwell, vol. 54(1), pages 147-186, March.
    7. Cerutti, Eugenio & Dell'Ariccia, Giovanni & Martinez Peria, Maria Soledad, 2007. "How banks go abroad: Branches or subsidiaries?," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1669-1692, June.
    8. Tito Cordella & Eduardo Levy Yeyati, 1998. "Public Disclosure and Bank Failures," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 110-131, March.
    9. James R. Hines & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 149-182.
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    More about this item

    Keywords

    country-by-country reporting; banks; tax havens; profit shifting; financial transparency; European Union;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • 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
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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