Banks’ tax disclosure, financial secrecy, and tax haven heterogeneity

Eberhartinger, Eva and Speitmann, Raffael and Sureth-Sloane, Caren (2021) Banks’ tax disclosure, financial secrecy, and tax haven heterogeneity. WU International Taxation Research Paper Series, 2020-01. WU Vienna University of Economics and Business, Universität Wien, Vienna.


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This study investigates the effect of mandatory public Country-by-Country Reporting (CbCR) for European banks on their presence in tax and regulatory havens. We find that the number of subsidiaries of European banks in tax havens declines significantly after the introduction of mandatory public CbCR in contrast to insurance firms that need not disclose. We document that this decline is mainly driven by a reduction of subsidiaries in small countries with little economic substance (“dot havens”) and in tax havens that are regulatory havens at the same time, i.e., with high financial secrecy. Further, we find that high exposure to reputational risk is a major amplifier of reorganizational activities. Our results explain prior mixed evidence and document that CbCR effectively curbs tax haven presence only under specific circumstances, i.e., in countries offering both tax shelter and financial secrecy, and more strongly for banks with high reputational risk. These findings suggest that increased tax disclosure on banks does not effectively attenuate tax haven presence per se, but only for a subset of havens and banks. Policymakers need to be aware of these limitations, especially during the current discussion of extending public CbCR to all large multinationals.

Item Type: Paper
Additional Information: Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna).
Keywords: financial secrecy, real effects, reputational risk, tax haven, tax disclosure
Classification Codes: JEL Classification: F23, G18, G21, G22, H20, H25, H32, M48
Depositing User: ePub Administrator
Date Deposited: 04 Mar 2020 14:58
Last Modified: 23 Sep 2021 16:24


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