Arbeitspapier

Can European banks' country-by-country reports reveal profit shifting? An analysis of the information content of EU banks' disclosures

We create a novel database of hand-collected information from the country-by-country reports (CbCRs) of more than 100 multinational bank groups headquartered in the EU for 2014-2016. We compare this new dataset with information from Orbis and Bank Focus to assess in how far the new disclosure obligation increased transparency on banks' tax avoidance behavior. Our descriptive analysis shows that CbCRs uncover a large fraction of worldwide profits and real activities in terms of employees of EU bank groups, especially in tax havens. We also document a striking disconnect between reported profits and real activity, noting considerable heterogeneity between different tax havens and bank groups from different headquarter countries. Regression analysis based on CbCR data and Bank Focus data leads us to expect a tax semi-elasticity of banks' reported profits of about -4.6. In this regard, CbCRs are indicative of a more pronounced tax sensitivity than conventional databases suggest. However, the lack of important economic variables (total assets and staff cost) impedes an exact estimation of banks' profit shifting based on CbCR data alone and with standard methods. These insights are especially relevant in the context of the ongoing political discussions whether to introduce a public CbCR for all large multinational firms in the EU.

Language
Englisch

Bibliographic citation
Series: ZEW Discussion Papers ; No. 19-042

Classification
Wirtschaft
Business Taxes and Subsidies including sales and value-added (VAT)
Tax Evasion and Avoidance
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
Subject
Tax Avoidance
Profit Shifting
Country-by-Country Reporting
Public Disclosure
Tax Transparency
Financial Institutions
Database

Event
Geistige Schöpfung
(who)
Dutt, Verena K.
Nicolay, Katharina
Vay, Heiko
Voget, Johannes
Event
Veröffentlichung
(who)
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
(where)
Mannheim
(when)
2019

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Dutt, Verena K.
  • Nicolay, Katharina
  • Vay, Heiko
  • Voget, Johannes
  • ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung

Time of origin

  • 2019

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