International Taxation and Cross-Border Banking
Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)
Tilburg University - Department of Economics
Tilburg University - Department of Economics; Duisenberg School of Finance; TILEC
CEPR Discussion Paper No. DP8436
This paper examines empirically how international taxation affects the volume and pricing of cross-border banking activities for a sample of banks in 38 countries over the 1998-2008 - period. Home country corporate income taxation of foreign-source bank income is found to reduce banking-sector FDI. Furthermore, such taxation is almost fully passed on into higher interest margins charged abroad. These results imply that international double taxation distorts the activities of international banks, and that the incidence of international double taxation of banks is on bank customers in the foreign subsidiary country. Our analysis informs the debate about additional taxation of the financial sector that has emerged in the wake of the recent financial crisis.
Number of Pages in PDF File: 40
Keywords: Cross-border banking, Interest margins, International taxation
JEL Classification: F23, G21, H25working papers series
Date posted: June 16, 2011
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