Increasing Tax Transparency: Investor Reactions to the Country-by-Country Reporting Requirement for EU Financial Institutions

Dutt, Verena; Ludwig, Christopher A.; Nicolay, Katharina; Vay, Heiko; Voget, Johannes

doi:10.2139/ssrn.3165410

Cited by 10 publications

(15 citation statements)

References 29 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Public CbCR represents an additional disclosure requirement, which is seen as an unanticipated shock for multinational financial institutions with operations in the EU (Joshi et al, 2019). This is because the disclosure of formerly private and potentially delicate financial and tax information became mandatory as a surprise event at the end of the EU legislation process on CRD IV (Dutt et al, 2019a). According to Article 89 of CRD IV, banks have to "disclose annually, specifying by Member State and by third country in which it has an establishment, the following information on a consolidated basis for the financial year: name(s), nature of activities and geographical location; turnover; number of employees on a full-time equivalent basis; profit or loss before tax; tax on profit or loss; public subsidies received.…”

Section: Tax Transparency Under Crd IVmentioning

confidence: 99%

“…In this vein, mandatory public CbCR, as the most comprehensive form of CbCR, was introduced for financial institutions with activities in the European Union (EU) in 2014. Based on an initiative by a group of EU parliamentarians to increase tax fairness and transparency in the financial sector (Dutt et al 2019a), Article 89 was added to the Credit Requirement Directive IV (CRD IV). Under this directive, regulated financial institutions such as banks and investment funds are required to inform the public on activities of their subsidiaries and branches at the country level, including sales, employees etc.…”

Section: Introductionmentioning

confidence: 99%

“…Third, we contribute to the strand of literature and on-going discussion about the tax disclosure by CbCreports of firms (European Parliament and the Council, 2017;Brown, 2018;De Simone and Olbert, 2019;Joshi et al, 2019;Overesch and Wolff, 2019;Dutt et al, 2019aDutt et al, , 2019b.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

2020

View full text Add to dashboard Cite

European regulation mandates public country-by-country reporting for banks and is expected to increase costs of tax haven activities. We hand-collect data from IFRS consolidation scopes for European banks and test whether the availability of additional public information on banks' global activity reduces their tax haven presence. In a difference-indifference analysis, we find that indeed tax haven presence has declined significantly after the introduction of mandatory public country-by-country reporting for European banks, as compared to the insurance industry, which is not subject to this regulation. In further tests, we show that this negative association is particularly driven by a reduction of subsidiaries in "Dot-Havens" and tax havens with high financial secrecy.

show abstract

Section: Tax Transparency Under Crd IVmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

2020

View full text Add to dashboard Cite

show abstract

“…To date, two published study exploit this setting. Dutt, Ludwig, Nicolay, Vay, and Voget (2019) assess whether investors in a bank perceive the introduction of the CbCR in the Capital Requirements Directive (CRD) IV as beneficial or damaging. The beneficial view comes from the perception that CbCR will increase financial reporting transparency, mitigate excessive risk-taking by banks and align the interests of investors and bank managers.…”

Section: Public Country-by-country Reporting and Investor Perceptionmentioning

confidence: 99%

“…The latter might cause reputational damage and decrease firm value. To exploit whether benefits or costs prevail, Dutt et al (2019) analyze the reaction of investors around the first public announcement (27 th February 2013) that CbCR for EU banks will be mandatory. Unlike similar studies, they surprisingly do not find a significant investor reaction, as measured by the three-day cumulative average abnormal return.…”

Section: Public Country-by-country Reporting and Investor Perceptionmentioning

confidence: 99%

Banks and Corporate Income Taxation: A Review

Gawehn

2019

SSRN Journal

View full text Add to dashboard Cite

In this paper, I review the empirical literature in the intersection of banks and corporate income taxation that emerged over the last two decades. To structure the included studies, I use a stakeholder approach and outline how corporate income taxation plays into the relation of banks and their four main stakeholders: bank regulators, customers, investors and tax authorities. My contribution to the literature is threefold: First, I contribute by providing, to the best of my knowledge, a first comprehensive review on this topic. Second, I point to areas for future research. Third, I deduce policy implications from the studies under review. In sum, the studies show that taxes distort banks' pricing decisions, the relative attractiveness of debt and equity financing, the decision to report on or off the balance sheet and banks' investment allocations. Empirical insights on how tax rules affect banks' decision-making are helpful for policymakers to tailor suitable and sustainable tax legislation directed at banks. JEL CLASSIFICATION G21, H22, H25, M41 KEYWORDS Corporate income taxes, banks, stakeholder approach, decision-making process I sincerely acknowledge helpful and constructive comments from participants of the TAF Research Seminar at the University of Paderborn. I also greatly acknowledge funding by the Deutsche Forschungsgemeinschaft

show abstract

Does Public Country‐by‐Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from the European Banking Industry*

Joshi

Outslay

Persson

et al. 2020

Contemporary Accting Res

View full text Add to dashboard Cite

In this study, we examine the effect of increased tax transparency on the tax planning behavior of European banks. In 2014, the European Union introduced public country-by-country reporting requirements to the banking industry. Treating this new requirement as an exogenous shock, we find limited evidence consistent with a decline in income shifting by the banks' financial affiliates in the post-adoption period (starting from 2015). We do not, however, find robust evidence of a significant change in the consolidated book effective tax rates among the affected banks. Our findings suggest that increased transparency from public countryby-country reporting can deter tax-motivated income shifting but that it did not appear to materially influence the banks' overall tax avoidance. Our findings have policy implications for the ongoing debate between the European Parliament, the Organisation for Economic Cooperation and Development, and accounting standard-setting bodies on whether to require multinationals to publish country-by-country reports.

show abstract

Increasing Tax Transparency: Investor Reactions to the Country-by-Country Reporting Requirement for EU Financial Institutions

Cited by 10 publications

References 29 publications

Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

Banks and Corporate Income Taxation: A Review

Does Public Country‐by‐Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from the European Banking Industry*

Contact Info

Product

Resources

About