The Tax System and the Financial Crisis

Ceriani, Vieri; Manestra, Stefano; Ricotti, Giacomo; Sanelli, Alessandra; Zangari, Ernesto

doi:10.2139/ssrn.1849864

Cited by 7 publications

(13 citation statements)

References 47 publications

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“…Secondly, it is a source of revenue through which banks, underpinned by taxpayers, can make a fair contribution to public finances, and thirdly, it is also a source of funding for the resolution of failed banks. However, studies such as those of Shaviro (2011) and Ceriani et al (2011) The last observation has been strongly supported by a recent book by Mian and Sufi (2014), who present a strong case that the US subprime crisis was caused by over-indebtedness and the subsequent household deleveraging was the major cause of the 'Great American Recession' that followed. The prevention of future cycle of housing debt requires replacing debt-based contracts with equity based home purchase contracts that allow risk sharing and provide for more debt forgiveness.…”

Section: Regulations and Taxationmentioning

confidence: 90%

“…Moreover, the proliferation prior to the crisis of hybrid instruments (such as Trust Preferred Securities; Engel et al, 1999) attracting interest in deduction yet allowable (subject to limits) as regulatory capital, strongly suggests tax incentives are conflicting with regulatory objectives. Ceriani et al (2011) consider the taxation of residential buildings and the deductibility of mortgage interest, the taxation of stock options and other performance-based remuneration, and the interaction between securitization and the tax system. They argue that three kinds of taxation contributed to the global financial crisis and the repeal of capital gains taxation on home selling through the 1997 US Tax Relief Act was particularly important.…”

Section: Regulations and Taxationmentioning

confidence: 99%

“…Furthermore, Ceriani et al (2011) argue that securitization creates opportunities for tax arbitrage and reduces the total tax paid by the originator, the special purpose vehicle (SPV) and the final investor. Because of tax differences in different countries, the SPV may be a tax-free vehicle under foreign law.…”

Section: Regulations and Taxationmentioning

confidence: 99%

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Balancing Bank Regulation and Taxation

2014

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This study gives an overview of bank taxation as an alternative to prudential regulations or nonrevenue 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 furthermore analyze taxation of financial instruments, trading and taxation of banking products and services and their ability to finance resolution mechanisms for banks 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 used to finance deposit guarantee and bank resolution mechanisms is potentially useful for financial stability, 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 by reducing the wasteful use of financial services.

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Section: Regulations and Taxationmentioning

confidence: 90%

Section: Regulations and Taxationmentioning

confidence: 99%

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Balancing Bank Regulation and Taxation

2014

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“…Owner-occupation is tax-favored with respect to renting in complicated financial instruments and international tax planning, reducing transparency. [3]- [6] and others have tried to answer the question whether taxation and tax policy can play any role in precipitating the financial crisis. They have considered as the most important elements of the tax system affecting financial crisis: the tax preference for corporate debt financing, the taxation of financial institutions, tax competition, tax reliefs for housing and for capital gains, the incoherence of capital income taxation (tax arbitrage, tax clienteles, and derivative securities), the use of tax havens for creating tax efficient securitization instruments and the tax preference of the performance-based remuneration.…”

Section: Tax Reliefs For Housingmentioning

confidence: 99%

“…Since borrowing to acquire other assets is generally not deductible, this makes investment in housing even more favored. Look at [6] or Taxes in Europe database for details.…”

Section: Tax Reliefs For Housingmentioning

confidence: 99%

Can Tax Policy Contribute to the Crisis?

Szarowská¹

2014

JOEBM

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Abstract-The discussion about causes of financial and economic crisis has focused also on tax consequences and measures. Taxes have not generated the crisis, but some aspects of tax policy may have led to increased risk-taking and indebtedness of banks, households and companies. The aim of the paper is to review main channels through which the tax policy can affect financial markets and financial stability. Attention is focused on taxation of financial institutions, tax reliefs for housing and for capital gains, tax preference for corporate debt financing. The paper examines last development and also current regulation and tax measures realized by national policymakers and European Commission with the goal to avoid future crises. The paper employs standard methods of scientific paper; mainly the method of description and comparative analysis.Index Terms-Crisis, corporate debt financing, reliefs for housing, taxation of financial institutions.

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Balancing the regulation and taxation of banking

Chaudhry

Mullineux

Agarwal

2015

International Review of Financial Analysis

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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.

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The Tax System and the Financial Crisis

Cited by 7 publications

References 47 publications

Balancing Bank Regulation and Taxation

Balancing Bank Regulation and Taxation

Can Tax Policy Contribute to the Crisis?

Balancing the regulation and taxation of banking

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