Taxation and Corporate Debt : Are Banks any Different?

Author/Editor:

Jost Heckemeyer ; Ruud A. de Mooij

Publication Date:

October 29, 2013

Electronic Access:

Free Full text (PDF file size is 442 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds that there is no significant difference. The marginal tax effect for both banks and non-banks is close to 0.2. However, the responsiveness differs considerably across the size distribution and the conditional leverage distribution. For nonbanks, we find a U-shaped relationship between asset size and tax responsiveness, although this pattern does not hold universally across the conditional leverage distribution. For banks, in contrast, the tax responsiveness declines linearly in asset size. Quantile regressions show further that capitaltight banks are significantly less responsive than are capital-abundant banks; the same pattern holds for the largest non-banks. Still, even the largest banks with high conditional leverage ratios feature a significant, positive tax response.

Series:

Working Paper No. 13/221

Subject:

English

Publication Date:

October 29, 2013

ISBN/ISSN:

9781484330340/1018-5941

Stock No:

WPIEA2013221

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

29

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