Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211640 
Authors: 
Year of Publication: 
1992
Series/Report no.: 
Bank of Finland Discussion Papers No. 11/1992
Publisher: 
Bank of Finland, Helsinki
Abstract: 
The paper analyzes the effects of taxation on the pricing of personai transactions deposits such as chequing accounts. In many fiscal systems, explicit interest on deposits is taxable while "implicit interest" in the form of underpriced bank services for depositors is not. Conditions are developed under which this asymmetry leads to zero deposit rates, zero service charges, ar both. Minimum balance requirements are also explained. It is found that the asymmetric tax system generally involves an implicit subsidy to the service production activities of banks. The subsidy to banking is increases when the tax rate on interest income is increased. The analysis is extended to the Finnish system of tax exempt regulated deposit rates. The implicit subsidy to the real activities of banks is shown to be even larger in this system.
Persistent Identifier of the first edition: 
ISBN: 
951-686-320-5
Document Type: 
Working Paper

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