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Bonus taxes and international competition for bank managers

Daniel Gietl and Andreas Haufler ()

European Economic Review, 2018, vol. 110, issue C, 41-60

Abstract: We analyze the competition in bonus taxation when banks compensate their managers by means of fixed and incentive pay and bankers are internationally mobile. Banks choose bonus payments that induce excessive managerial risk-taking to maximize their private benefits of existing government bailout guarantees. In this setting the international competition in bonus taxes may feature a ‘race to the bottom’ or a ‘race to the top’, depending on whether bankers are a source of net positive tax revenue or inflict net fiscal losses on taxpayers as a result of incentive pay. A ‘race to the top’ becomes more likely when governments’ impose only lax capital requirements on banks, whereas a ‘race to the bottom’ is more likely when bank losses are partly collectivized in a banking union.

Keywords: Bonus taxes; International tax competition; Migration (search for similar items in EconPapers)
JEL-codes: H20 H87 G28 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Bonus Taxes and International Competition for Bank Managers (2017) Downloads
Working Paper: Bonus Taxes and International Competition for Bank Managers (2017) Downloads
Working Paper: Bonus Taxes and International Competition for Bank Managers (2016) Downloads
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