No. 63: Negative interest rates and corporate tax behavior in banks

Abstract

This study examines the impact of negative interest rate (NIR) regimes on corporate tax behavior. We argue that NIRs act as a de-facto tax levied by central banks and investigate how this ‘tax’ affects banks’ corporate tax planning. Using a sample of domestic banks in OECD countries and a difference-in-difference research design, we find that banks affected by negative interest rate policies exhibit an increase in tax planning following the adoption of NIR, compared to unaffected banks. We document that the introduction of NIRs is associated with a 2.3 to 2.6 percentage point decrease in GAAP ETR and that the effects of NIRs are more pronounced in banks with a lower distance to default or lower reserves, and in countries with lower levels of tax enforcement or lower levels of trust in the government. Collectively, our results suggest that NIRs lead banks to increase tax planning as a funding source.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin, der Goethe-Universität Frankfurt und der Carl von Ossietzky Universität Oldenburg, die die gleiche Forschungsagenda verfolgen.