International Taxation and Cross-Border Banking

H.P. Huizinga, J. Voget, W.B. Wagner

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Abstract

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. Home country corporate income 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.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Volume2011-066
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-066

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Keywords

  • Cross-border banking
  • International taxation
  • Interest margins

Cite this

Huizinga, H. P., Voget, J., & Wagner, W. B. (2011). International Taxation and Cross-Border Banking. (CentER Discussion Paper; Vol. 2011-066). Economics.