Tax Avoidance - Are Banks Any Different?

51 Pages Posted: 12 Jul 2019

See all articles by Vanessa Gawehn

Vanessa Gawehn

Paderborn University

Jens Mueller

Paderborn University

Date Written: July 11, 2019

Abstract

While the public has noticed the need for the detection of potential tax loopholes and demand further improvement in the taxation of banks, there is scarce empirical evidence of whether banks’ degree of tax avoidance actually differs from that of non-banks. We try to close this gap by investigating U.S. banks’ tax avoidance behavior for a sample period from 2004 to 2016. To anchor banks’ tax avoidance, we use annual Cash ETRs and GAAP ETRs and compare them to the tax avoidance behavior of non-banks. As there are various channels of tax avoidance, we account for differences in several areas such as corporate fundamentals, the degree of multinationality and regulatory scrutiny. We provide cautious evidence that banks have significantly larger Cash ETRs than non-banks. Via the use of quantile regression we find evidence that the assocation between banks and ETRs is not constant over the whole tax avoidance distribution, but shows a positive association for lower parts of the tax avoidance distribution and a negative association for higher parts. In line with recent research, we provide some evidence that the difference in Cash ETRs between banks and non-banks is more pronounced for worse-capitalized, than for better-capitalized banks.

Keywords: tax avoidance, banks, non-banks, standardized coefficients, quantile regression

JEL Classification: G21, H26, M41

Suggested Citation

Gawehn, Vanessa and Mueller, Jens, Tax Avoidance - Are Banks Any Different? (July 11, 2019). Available at SSRN: https://ssrn.com/abstract=3418506 or http://dx.doi.org/10.2139/ssrn.3418506

Vanessa Gawehn (Contact Author)

Paderborn University

Warburger Str. 100
Paderborn, 33098
Germany

Jens Mueller

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
138
PlumX Metrics