Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

Abstract

European regulation mandates public country-by-country reporting for banks and is expected to increase reputational costs in case of tax haven activities. We test whether the availability of additional public information on the locations of banks' subsidiaries reduces their tax haven presence. In a preliminary difference-in-difference analysis we find that indeed, tax haven presence in “Dot-Havens” has declined significantly after the introduction of mandatory public country-by-country reporting for European banks, as compared to the insurance industry which is not subject to this regulation.

Keywords: country-by-country reporting, real effects, tax haven, tax disclosure

JEL Classification: F23, G18, G21, G22, H20, H25, H32, M48