CEPII, Recherche et Expertise sur l'economie mondiale
Banks in Tax Havens: First Evidence based on Country-by-Country Reporting


Vincent Bouvatier
Gunther Capelle-Blancard
Anne-Laure Delatte

 Highlights :
  • This paper provides a quantitative assessment of the importance of tax havens in international banking activity.
  • The average effect of being a tax haven is an extra presence of foreign affiliates by 168%.
  • For EU banks, the main tax havens are located within Europe.
  • Lenient regulatory environment attract extra commercial presence.
  • The tax savings for EU banks is estimated between Euros 1 billion and Euros3.6 billion.

 Abstract :
Since the Great Financial Crisis, several scandals have exposed a pervasive light on banks' presence in tax havens. Taking advantage of a new database, this paper provides a quantitative assessment of the importance of tax havens in international banking activity. Using comprehensive individual country-by-country reporting from the largest banks in the European Union, we provide several new insights: 1) Tax havens attract large extra banking activity beyond the regular gravity factors (+168% according to our estimates); 2) For EU banks, the main tax havens are located within Europe: Luxembourg, Isle of Man and Guernsey rank at the top of the foreign affiliates; 3) Attractive low tax rates are not sufficient to drive extra activity; 4) High quality of governance is not a driver, but banks avoid countries with weakest governance; 5) Banks also avoid the most opaque countries; 6) The tax savings for EU banks is estimated between €1 billion and €3.6 billion, i.e. 5 and 20% of fiscal revenues.

 Keywords : Tax evasion | International banking | Tax havens | Country-by-country reporting

 JEL : F23, G21, H22, H32
CEPII Working Paper
N°2017-16, September 2017

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 Fields of expertise

Money & Finance
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