The impact of taxation on bank profits: Evidence from EU banks

Vincenzo Chiorazzo () and Carlo Milani ()

Journal of Banking & Finance, 2011, vol. 35, issue 12, 3202-3212

Abstract: Using bank-level data for the period 1990–2005, we investigate to what extent European banks are able to shift their tax-burden forward. We examine the effects of corporate income tax (CIT) and value added tax (VAT) on pre-tax profits and their components, and find that both are shifted forward. The pass-through mainly involves total operating income, but as far as CIT is concerned it also affects loss provisions, with negative implications on stability of the banking systems.

Keywords: Bank profitability; Tax-shifting; Taxation; Financial stability (search for similar items in EconPapers)
JEL-codes: E63 G21 H20 H21 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:12:p:3202-3212

DOI: 10.1016/j.jbankfin.2011.05.002

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