Why Do Banks Have So Much Debt In Tax Havens?

Lorenzo Garlanda-Longueville, Mathias Lé and Kevin Parra Ramirez

No 2025-43, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: Tax havens represent the largest financing hub for financial institutions. For banks, they account for more than 20% of all cross-border banking debts worldwide. Yet, our understanding of the underlying drivers remains limited, partly due to data scarcity and partly because of the difficulty of disentangling tax incentives from regulatory effects. Drawing on a unique global dataset covering major international banks and offshore financial centres – and employing a novel approach to isolate regulatory arbitrage – this paper finds that the location of cross-border intra-group debt held by multinational banks is shaped by tax considerations, even when regulatory differences are accounted for. In doing so, we provide, for the first time, direct evidence of profit shifting via debt shifting at a global scale, overcoming a key limitation of existing studies, which typically rely on single-country data. Based on our sample data, we show that the magnitude of “excess” offshore banking debt globally recorded in tax havens is significant.

Keywords: Profit shifting; Debt shifting; Multinational banks; Taxation; Intragroup transactions (search for similar items in EconPapers)
JEL-codes: F23 F34 G21 H26 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2025
New Economics Papers: this item is included in nep-acc, nep-fdg, nep-fmk and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Why Do Banks Have So Much Debt In Tax Havens? (2025)
Working Paper: Why Do Banks Have So Much Debt in Tax Havens? (2025)
Working Paper: Why Do Banks Have So Much Debt In Tax Havens? (2025)
Working Paper: Why Do Banks Have So Much Debt in Tax Havens? (2025)
Working Paper: Why Do Banks Have So Much Debt In Tax Havens? (2025)
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