International Taxation and Cross-Border Banking
This paper examines empirically how international taxation affects the volume and pricing of cross-border banking activities for a sample of banks in 38 countries over the 1998-2008 period. International double taxation of foreign-source bank income is found to reduce banking-sector FDI. Furthermore, such taxation is almost fully passed on into higher interest margins charged abroad. These results imply that international double taxation distorts the activities of international banks, and that the incidence of international double taxation of banks is on bank customers in the foreign subsidiary country. Our analysis informs the debate about additional taxation of the financial sector that has emerged in the wake of the recent financial crisis.
We thank Ben Lockwood and Nadine Riedel for comments on an earlier draft and Ata Can Bertay for research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Harry Huizinga & Johannes Voget & Wolf Wagner, 2014. "International Taxation and Cross-Border Banking," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 94-125, May. citation courtesy of
International Taxation and Cross-Border Banking, Harry Huizinga, Johannes Voget, Wolf Wagner. in Business Taxation (Trans-Atlantic Public Economics Seminar), Devereux and Gordon. 2014