Does Taxation on Banks Tax Bank Borrowers? Evidence from the Tokyo Bank Tax Experiment

Peter Hull (peter.hull@ny.frb.org) and Masami Imai
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Peter Hull: Federal Reserve Bank of New York

No 2011-005, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: We investigate the economic impacts of bank taxation on the value of banks and that of borrowing firms, exploiting the surprise announcement of a tax by the Tokyo metropolitan government as a natural experiment. We find that the tax announcement had broad effects on the share prices of banks, although the effects are stronger for a subset of soon-to-be taxed banks. However, the adverse effects of the tax on bank borrowers, although statistically significant, turn out to be quantitatively small (a half of the effects on bank share prices). These results suggest that the adverse economic consequence of bank taxation is felt primarily on banks themselves.

Pages: 11 pages
Date: 2011-10
New Economics Papers: this item is included in nep-acc and nep-ban
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