No. 10: Banks and corporate income taxation: A review

Year: 2019
Type: Working Paper


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. I identify six dimension where taxes are important for banks: debt financing, tax incidence, organizational form choices, profit shifting, financial reporting transparency and customers’ tax avoidance. In addition, the studies in this review show that corporate income taxes lead to distortions between debt and equity financing, between on- and offbalance sheet financing, of prices and of investment allocations. 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 deduce policy implications from the studies under review. Third, I point to areas of future research in the intersection of bank regulation and tax legislation.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, WHU – Otto Beisheim School of Management, ESMT Berlin and Goethe University Frankfurt who share the same research agenda.