Boring Banks and Taxes

32 Pages Posted: 7 May 2015

See all articles by Rafael Aigner

Rafael Aigner

University of Bonn - The Bonn Graduate School of Economics

Felix Bierbrauer

University of Cologne

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Date Written: April 29, 2015

Abstract

How do taxes in the financial sector affect economic outcomes? We analyze a simple general equilibrium model with financial intermediation. We formalize a trade-off between tax policies that burden the owners of banks and tax policies that burden households. We also study the implications of the financial sector’s exemption from value added taxation (VAT). Main results are that an increased taxation of the banks’ profits goes together with a larger financial sector, as measured by the volume of loans and the employment in banking. We also show that the general presumption that the VAT-exemption is beneficial for banks is unjustified.

Keywords: taxation of the financial sector, financial activities tax, value added taxation

JEL Classification: G210, H210, H220

Suggested Citation

Aigner, Rafael and Bierbrauer, Felix, Boring Banks and Taxes (April 29, 2015). CESifo Working Paper Series No. 5309, Available at SSRN: https://ssrn.com/abstract=2603137

Rafael Aigner

University of Bonn - The Bonn Graduate School of Economics ( email )

Adenauerallee 24-26
Bonn, D-53113
Germany

Felix Bierbrauer (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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