Real Effects of Public Country-by-Country Reporting and the Firm Structure of European Banks

Publication: Working/Discussion PaperWU Working Paper

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This study investigates the effect of mandatory public Country-by-Country Reporting (CbCR) for European banks on their presence in tax and regulatory havens. We find that the number of subsidiaries of European banks in tax havens declines significantly after the introduction of mandatory public CbCR in contrast to insurance firms that need not disclose. We document that this decline is mainly driven by a reduction of subsidiaries in small countries with little economic substance (“dot havens”) and in tax havens that are regulatory havens at the same time, i.e., with high financial secrecy. Further, we find that high exposure to reputational risk is a major amplifier of reorganizational activities. Our results explain prior mixed evidence and document that CbCR effectively curbs tax haven presence only under specific circumstances, i.e., in countries offering both tax shelter and financial secrecy, and more strongly for banks with high reputational risk. These findings suggest that increased tax disclosure on banks does not effectively attenuate tax haven presence per se, but only for a subset of havens and banks. Policymakers need to be aware of these limitations, especially during the current discussion of extending public CbCR to all large multinationals.
Original languageEnglish
Publication statusPublished - 2020

Publication series

SeriesWU International Taxation Research Paper Series

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502052 Business administration
  • 502033 Accounting
  • 502035 Auditing and trusts
  • 502038 Taxation

WU Working Paper Series

  • WU International Taxation Research Paper Series

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