Can tax policy co-cause the crisis?

Szarowska, Irena (2013): Can tax policy co-cause the crisis? Published in: DEEV, O; KAJUROVA, V; KRAJICEK, J. (eds.) 10th International Scientific Conference on European Financial Systems 2013. No. WOS:000324654400048 (June 2013): pp. 323-330.

Abstract

Although taxes have not generated the crisis, some aspects of tax policy may have led to increased risk-taking and indebtedness of banks, households and companies. Tax incentives may indeed the behavior of economic agents, leading them to wrong economic decisions. The aim of the paper is to review main channels through which the tax policy can affect financial markets and financial stability. Attention is focused on last and current development of tax reliefs for housing and capital gains, tax benefits for corporate debt financing and taxation of financial institutions Conventional scientific methods such as analysis, induction, comparison and synthesis are used in the paper.

• Item Type: MPRA Paper
• Language: English
• Keywords: crisis; corporate debt financing; housing; taxation of financial institutions
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G3 - Corporate Finance and Governance; H - Public Economics > H2 - Taxation, Subsidies, and Revenue

References

Acharya, V. V., Gale, D., Yorulmazer, T. (2011). Rollover Risk and Market Freezes. Journal of Finance, vol. 66, pp. 1177-1209.

Alworth, J., Arachi, G. (2012). Taxation and the financial crisis. 2nd Ed. Oxford: Oxford University Press.

Ceriani,V., Manestra, S., Riccoti, G., Sanelli, A., Zangari, E. (2011) The tax system and the financial crisis. Questioni di Economia e Finanza, vol. 85, pp. 1-39.

Desai, M. A., Foley, F. C., Hines, J.R. (2004) A Multinational Perspective on Capital Structure Choice and Internal Capital Markets. Journal of Finance, vol. 59, pp. 2451-2487.

Devereux, M. P., Mooij, R.A. (2009). Alternative Systems of Business Tax in Europe: An applied analysis of ACE and CBIT Reforms. Taxation Papers, vol. 17, pp. 1-155.

Eddins, S.T. (2009). Tax Arbitrage Feedback Theory. [Online] Available: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356159.

European Commission (2011). COM (2011) 594.

European Commission (2013). Proposal for a Council Directive Implementing Enhanced Cooperation in the Area of Financial Transaction Tax.

Giuli, M. (2010). Learning from the Financial Crisis: Tax Competition and Income Inequalities. Madariaga Paper, vol. 3, pp. 1 -19.

Griffith-Jones, S., Persaud A. (2012). Financial Transactions Taxes. [Online] Available: http://www.europarl.europa.eu/document/activities/cont/201202/20120208ATT37596/20120208ATT37596EN.pdf

Hagelüken A. (2012). Und sie funktioniert doch. [Online] Available: http://www.sueddeutsche.de/wirtschaft/eu-studie-zur-finanztransaktionssteuer-und-sie-funktioniert-doch-1.1353438.

Hasman, A., Lopez, A. L., Samartin, M. (2011). Government, taxes and banking crises. Journal of Banking & Finance, vol. 35, pp. 2761-2770.

Hemmelgarn, T., Nicodeme, G. (2010). The 2008 Financial Crisis and Taxation Policy. CESifo Working Paper Series No. 2932. Available: http://ssrn.com/abstract=1546973.

Hilbers, A., Hoffmaister, A. W., Banerji, A., Shi, A. (2008). House price developments in Europe: a comparison. IMF Working Paper, No. 08/211. Available: http://www.imf.org/external/pubs/ft/wp/2008/wp08211.pdf

Huizinga, H., Laeven, L. and Nicodeme, G. (2008). Capital Structure and International Debt Shifting. Journal of Financial Economics, vol. 88, pp. 80-118.

International Monetary Fund. (2009). Debt Bias and Other Distortions: Crisis-Related Issues in Tax Policy. CESIFO Working Paper No. 2932. Available: http://www.imf.org/external/np/pp/eng/2009/061209.pdf.

Johansson, A., Heady, Ch., Arnold, J., Brys B., Vartia, L. (2008). Tax and economic growth. OECD Working Paper No.28/08. Available: http://www.olis.oecd.org/olis/2008doc.nsf/linkto/eco-wkp(2008)28.

Keen, M., Klemm, A., Perry, V. (2010). Tax and the Crisis. Fiscal Studies, vol. 31, pp. 43-79.

Lierse, H. (2012). European taxation during the crisis: does politics matter? Journal of Public Policy, vol. 32, pp. 207-230.

Lloyd, G. (2009) Moving beyond the Crisis: Tax Policies for the Soundness of Financial Markets. [Online]. Available: http://www.itdweb.org/documents/Geoff_Lloyd_Newsletter_Special_July_09OECD_tax_and_financial_markets.pdf

Lutz, B., Molloy, R., Shan, H. (2011). The housing crisis and state and local government tax revenue: Five channels. Regional Science and Urban Economics, vol. 41, pp. 306-319.

Noord, P. van den (2005). Tax Incentives and House Price Volatility in the Euro Area: Theory and evidence. Économie international, vol. 101, pp. 29-45.

Noord, P. van den, Heady, C. (2001). Surveillance of Tax Policies: A Synthesis of Findings in Economic Surveys. OECD Economics Department Working Papers, No. 303. Available: http://dx.doi.org/10.1787/034063184564.

Shaviro, D. (2011). The 2008 Financial Crisis: Implications for Income Tax Reform. NYU Law and Economics Research Paper No. 09-35. Available: http://dx.doi.org/10.2139/ssrn.1442089.

Slemrod, J. (2009). Lessons for Tax Policy in the Great Recession, presented at the National Tax Association Spring meeting, Washington, DC.