Interactions between bank levies and corporate taxes: How is bank leverage affected?

Arbeitspapier

Regulatory bank levies set incentives for banks to reduce leverage. At the same time, corporate income taxation makes funding through debt more attractive. In this paper, we explore how regulatory levies affect bank capital structure, depending on corporate income taxation. Based on bank balance sheet data from 2006 to 2014 for a panel of EU-banks, our analysis yields three main results: The introduction of bank levies leads to lower leverage as liabilities become more expensive. This effect is weaker the more elevated corporate income taxes are. In countries charging very high corporate income taxes, the incentives of bank levies to reduce leverage turn insignificant. Thus, bank levies can counteract the debt bias of taxation only partially.

Object Details

• ISBN: 978-3-95729-750-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 43/2020

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Economics of Regulation
• Subject: bank levies ; debt bias of taxation ; bank capital structure

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bremus, Franziska ; Schmidt, Kirsten ; Tonzer, Lena
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/222662
• Last update: 10.03.2025, 11:43 AM CET