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The Ability of Banks to Shift Corporate Income Taxes to Customers

Gunther Capelle-Blancard () and Olena Havrylchyk

Working Papers from CEPII research center

Abstract: In the context of the financial crisis, many projects of bank levies have emerged. Yet, there is very little evidence on the incidence of bank taxes and, hence, it is not clear who will bear the burden of the new taxes. In this paper, we investigate the ability of banks to shift corporate income taxes to their clients and we consider whether tax incidence is influenced by market competition and banks’ market power. Our sample consists of 1,411 European commercial banks over the period 1992-2008. To measure competition we rely on a large number of indicators, such as banks’ market share, the Herfindhal index, the Lerner index and the Panzar and Rosse h-statistic. We find that even in uncompetitive markets banks are not able to shift corporate income taxes to their customers. Our results contradict earlier papers that find a significant pass-through, and we argue that previous studies suffer either from endogeneity problems or from the wrong specification of the tax burden.

Keywords: Bank taxation; Bank levy; Net interest margin; European banks; Banking; market structure; Corporate tax incidence (search for similar items in EconPapers)
JEL-codes: G21 H25 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-acc, nep-ban and nep-pbe
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Citations: View citations in EconPapers (4) Track citations by RSS feed

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Related works:
Working Paper: The ability of banks to shift corporate income taxes to customers (2014)
Working Paper: The ability of banks to shift corporate income taxes to customers (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2013-09

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