Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/118665 
Year of Publication: 
2015
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods No. 2015/7
Publisher: 
Max Planck Institute for Research on Collective Goods, Bonn
Abstract: 
How do taxes in the financial sector affect economic outcomes? We analyze a simple general equilibrium model with financial intermediation. We formalize a trade-off between tax policies that burden the owners of banks and tax policies that burden households. We also study the implications of the financial sector's exemption from value added taxation (VAT). Main results are that an increased taxation of the banks' profits goes together with a larger financial sector, as measured by the volume of loans and the employment in banking. We also show that the general presumption that the VAT-exemption is beneficial for banks is unjustified.
Subjects: 
taxation of the financial sector
financial activities tax
value added taxation
JEL: 
H21
G21
H22
Document Type: 
Working Paper

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