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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. Karolina Puławska, 2021. "The Effect of Bank Levy Introduction on Commercial Banks in Europe," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 14(6), pages 1-26, June.
    3. 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.
    4. 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.
    5. 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.
    6. 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).
    7. 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.

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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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