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Tax avoidance through securitization

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  • Uhde, André
Abstract
Employing a unique hand-collected sample of 956 credit risk securitization transactions issued by 64 stock-listed European banks across the EU-13 plus Switzerland over the period from 1997 to 2010, this paper empirically analyzes the impact of securitization on the issuing banks’ effective tax rates. Our analysis reveals that banks may reduce their tax expense through securitization via a direct and indirect channel suggesting that tax avoidance may be a further motive for banks to engage in the securitization business. These baseline findings remain robust under various robustness checks, especially when implementing structural equation models and controlling for a reverse causality between the banks’ tax burden and their incentive to securitize. Finally, various sensitivity analyses provide further important results and implications for tax policies, banking regulation and the ongoing process of revitalizing the European securitization market.

Suggested Citation

  • Uhde, André, 2021. "Tax avoidance through securitization," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 411-421.
    • Handle: RePEc:eee:quaeco:v:79:y:2021:i:c:p:411-421
    DOI: 10.1016/j.qref.2020.07.008
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    More about this item

    Keywords

    Securitization; Credit risk transfer; Effective tax rates; European banking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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