On the Incidence of Bank Levies: Theory and Evidence

Item Type Journal paper
Abstract In the aftermath of the financial crisis, several European countries have introduced levies on bank liabilities. The aim is to compensate taxpayers for the provision of bailouts and guarantees and to internalize the fiscal costs of future banking crises. This paper studies the tax incidence: Building on the Monti-Klein model, we predict that banks shift the tax mainly to borrowers by raising lending rates and that deposit rates may increase because deposits are partly exempt. Bank-level evidence from 23 EU countries (2007-2013) shows that the levy indeed increases the lending and the deposit rate as well as the net interest margin. Banks adjust differently to this tax depending on the composition of their balance sheets: In line with theory, especially those banks with a high loan-to-deposit ratio raise the interest rates. Market concentration and the capital structure influence the magnitude of the pass-through, which is stronger in concentrated markets and weaker in case of banks with a high regulatory capital ratio.
Authors Kogler, Michael
Journal or Publication Title International Tax and Public Finance
Language English
Subjects economics
HSG Classification contribution to scientific community
Refereed Yes
Date 2019
Publisher Springer
Series Name Discussion Paper
Number 26
Page Range 677-718
Publisher DOI https://doi.org/10.1007/s10797-018-9526-z
Official URL https://link.springer.com/article/10.1007/s10797-0...
Depositing User Michael Kogler
Date Deposited 17 Nov 2015 16:51
Last Modified 20 Jul 2022 17:26
URI: https://www.alexandria.unisg.ch/publications/245457



Download (999kB) | Preview


Kogler, Michael (2019) On the Incidence of Bank Levies: Theory and Evidence. International Tax and Public Finance, (26). 677-718.


Edit item Edit item