{
  "title": "Taxation and Leverage in International Banking",
  "publication": "IMF Working Papers, November 30, 2012",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129",
  "overlayPath": "/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/index.md",
  "summary": "This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and (ii) whether i",
  "sections": [
    {
      "heading": "Summary",
      "content": "- This paper explores how corporate taxes affect the financial structure of multinational banks.\n- Tests conducted:\n  - (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and\n  - (ii) whether international corporate tax differentials vis-a-vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting.\n- Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, the paper finds that taxes matter significantly through both channels.\n- The international debt shifting channel is more robust and tends to be quantitatively more important.\n- The results imply that taxation causes significant international debt spillovers through multinational banks, with potentially important implications for tax policy."
    },
    {
      "heading": "Data and Methodology",
      "content": "- Dataset: subsidiary-level dataset covering 558 commercial bank subsidiaries of the 86 largest multinational banks.\n- Analytical framework: guided by a simple theory of optimal capital structure to test traditional domestic debt bias and international debt shifting due to tax differentials."
    },
    {
      "heading": "Key Findings",
      "content": "- Taxes significantly influence subsidiary bank leverage through:\n  - The traditional debt bias channel (domestic corporate tax incentives to use debt).\n  - International debt shifting induced by international corporate tax differentials vis-a-vis foreign subsidiary banks.\n- The international debt shifting channel:\n  - Is more robust across analyses.\n  - Is quantitatively more important than the traditional domestic debt bias channel.\n- Policy-relevant implication: taxation induces significant international debt spillovers via multinational banks."
    },
    {
      "heading": "Subjects and Keywords",
      "content": "- Subject: Banking, Corporate income tax, Debt bias, Deposit insurance, Financial crises, Tax allowances, Tax policy, Taxes\n- Keywords: bank leverage, Bank taxation, banking sector, capital requirement, Corporate income tax, corporate tax, debt bias, debt ratio, Deposit insurance, Global, leverage, parent bank, short-term debt, subsidiary bank, Tax allowances, tax credit, tax difference, WP\n\nSource: IMF Working Papers — \"Taxation and Leverage in International Banking\" (Working Paper No. 2012/281), authors Grace Weishi Gu, Ruud A. de Mooij, Tigran Poghosyan, November 30, 2012.\n\n---\n\n Content in this bundle\n\n- wp12281\n  - wp12281 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp12281 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/bundle-manifest.json)",
    "Authors: Grace Weishi Gu, Ruud A. de Mooij, Tigran Poghosyan",
    "Published: November 30, 2012",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475572209.001",
    "This paper explores how corporate taxes affect the financial structure of multinational banks.",
    "Tests conducted:",
    "Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, the paper finds that taxes matter significantly through both channels.",
    "The international debt shifting channel is more robust and tends to be quantitatively more important.",
    "The results imply that taxation causes significant international debt spillovers through multinational banks, with potentially important implications for tax policy.",
    "Dataset: subsidiary-level dataset covering 558 commercial bank subsidiaries of the 86 largest multinational banks.",
    "Analytical framework: guided by a simple theory of optimal capital structure to test traditional domestic debt bias and international debt shifting due to tax differentials.",
    "Taxes significantly influence subsidiary bank leverage through:",
    "The international debt shifting channel:",
    "Policy-relevant implication: taxation induces significant international debt spillovers via multinational banks.",
    "Subject: Banking, Corporate income tax, Debt bias, Deposit insurance, Financial crises, Tax allowances, Tax policy, Taxes",
    "Keywords: bank leverage, Bank taxation, banking sector, capital requirement, Corporate income tax, corporate tax, debt bias, debt ratio, Deposit insurance, Global, leverage, parent bank, short-term debt, subsidiary bank, Tax allowances, tax credit, tax difference, WP",
    "**_wp12281**"
  ],
  "related": [
    {
      "title": "_wp12281",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12281.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12281.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12281.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/index.md",
    "json": "/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/31/taxation-and-leverage-in-international-banking-40129/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-18T06:38:08.313Z"
}