Balancing the regulation and taxation of banking

Abstract

This study gives an overview of bank taxation as an alternative to prudential regulations or non-revenue taxation. We review existing bank taxation with a view to eliminating distortions in the tax system, which have incentivized banks to engage in risky activities in the past. We focus particularly on 'too big to be allowed to fail' banks, which have been enjoying a competitive advantage over their smaller counterparts. We furthermore analyze taxation of financial instruments trading and taxation of banking products and services and their ability to finance resolution mechanisms for banks and to ensure their stability. In this respect, we put forward the following arguments: (1) that a financial transaction tax is economically inefficient and potentially costly for the economy and may not protect taxpayers; (2) that a bank levy is perhaps good for financial stability to finance resolution mechanisms, but that it poses the threat of double taxation, together with the proposed Basel III liquidity ratios; and (3) that we support the elimination of exemption from value added tax (VAT) for financial services in order to provide banks with a level playing field, whilst retaining exemption for basic payments services. This is expected to improve efficiency because it might stop the wasteful use of financial services. To avoid distortions, VAT should be applied to all financial services, including complex ones such as derivatives. VAT might reduce bank lending because of higher costs for customers, but arguably there was over-borrowing prior to the financial crisis.

Public and Legal Burdens on Cooperative Banks and Limits of the Financial Strength of Taxes

“…Throughout history, taxes were imposed according to the needs of the ruler, without a formal reduction of the tax burden (Brzeziński, 2011). Tax strength and taxation of banks were discussed in numerous scientific works (Wołowiec, 2008;Dec & Masiukiewicz, 2013;Devereux, Johannesen, & Vella, 2015;Chaudhry, Mullineux, & Agarwal, 2015;Gu, de Mooij, & Poghosyan, 2015;Gajewski, 2016;Schepens, 2016;Buch, Hilberg, & Tonzer, 2016;Pyka & Klimontowicz, 2017;Capelle-Blancard & Havrylchyk, 2017;Cichy, 2017;Piotrowski, 2017;Wiśniewski, 2017;Muszyński, Pobrane z czasopisma Annales H -Oeconomia http://oeconomia.annales.umcs.pl Data: 04/01/2021 03:26:47 U M C S 2017; Roe & Troge, 2018;Celerier, Kick, & Ongena, 2018). On the other hand, the study on charging the fees and taxes of cooperative banks was not a leading area in the literature, but some works in this field can be distinguished (Kata, 2016b;Golec, 2016;Kurkliński, 2018).…”

Global banking after the GFC: lessons for India

“…That having been said, financial stability is a public good that taxpayers should, at least in part, pay for, especially as they enjoy the tax revenue from the profits and the high 4 salaries and bonuses generated in the good times, and also benefit from the jobs created by a growing and thriving banking sector when it allocates capital efficiency. Hence, the appropriate taxation, regulation and supervision of banks is an important public policy issue (Chaudhry, Mullineux, and Agarwal 2014).…”

The Influence of Tax Planning and Tunneling Incentive on Transfer Pricing Decisions in Multinational Food and Beverage Companies Sub-Sector Listed on IDX from 2010-2018 Period

“…This practice is known as tax avoidance by increasing the purchase price and reducing the selling price between companies in one group and transferring profits to companies operating in countries that apply low tax rates [6]. Tax management aims to fulfill tax obligations as best as possible in accordance with existing regulations and for the efficiency of tax obligations to achieve proper profit and liquidity [7]. Ownership structure in Indonesia is concentrated on a few owners, resulting in agency conflicts between major shareholders and minority shareholders.…”