Trading Offshore: Evidence on Banks' Tax Avoidance

Dominika Langenmayr and Franz Reiter

No 6664, CESifo Working Paper Series from CESifo

Abstract: Little is known about how banks shift profits to low-tax countries. Because of their specific business model, banks use profit shifting channels different from those of other firms. We propose a novel and bank-specific method of profit shifting: the strategic relocation of proprietary trading to low-tax jurisdictions. Using regulatory data from the German central bank, we show that a one percentage point lower corporate tax rate increases banks’ fixed-income trading assets by 4.0% and trading derivatives by 9.0%. This increase does not arise from a relocation of real activities (i.e. traders); instead, it stems from the relocation of book profits.

Keywords: profit shifting; multinational banks; corporate taxation; proprietary trading (search for similar items in EconPapers)
JEL-codes: F21 G21 H25 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Trading offshore: evidence on banks’ tax avoidance (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6664

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