Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171128
Authors: 
Langenmayr, Dominika
Reiter, Franz
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6664
Abstract: 
Little is known about how banks shift profits to low-tax countries. Because of their specific business model, banks use profit shifting channels different from those of other firms. We propose a novel and bank-specific method of profit shifting: the strategic relocation of proprietary trading to low-tax jurisdictions. Using regulatory data from the German central bank, we show that a one percentage point lower corporate tax rate increases banks’ fixed-income trading assets by 4.0% and trading derivatives by 9.0%. This increase does not arise from a relocation of real activities (i.e. traders); instead, it stems from the relocation of book profits.
Subjects: 
profit shifting
multinational banks
corporate taxation
proprietary trading
JEL: 
H25
G21
F21
Document Type: 
Working Paper

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