Title: Banks, debt and risk: assessing the spillovers of corporate taxes
Authors: FATICA SERENAHEYNDERICKX WOUTERPAGANO ANDREA
Citation: ECONOMIC INQUIRY vol. 58 no. 2 p. 1023-1044
Publisher: WILEY
Publication Year: 2020
JRC N°: JRC113051
ISSN: 0095-2583 (online)
URI: https://onlinelibrary.wiley.com/doi/epdf/10.1111/ecin.12827
https://publications.jrc.ec.europa.eu/repository/handle/JRC113051
DOI: 10.1111/ecin.12827
Type: Articles in periodicals and books
Abstract: We find evidence of tax-driven strategic allocation of debt and asset risk across group entities of European banks.We evaluate the effects that establishing tax neutrality between debt and equity finance has on systemic risk, and show that the degree of coordination in implementing the hypothetical tax reform matters. In particular, a coordinated elimination of the tax advantage of debt would significantly reduce systemic losses in the event of a severe banking crisis. By contrast, uncoordinated tax reforms are not equally beneficial precisely because national tax policies generate spillovers through cross-border bank activities.
JRC Directorate:Growth and Innovation

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