Work detail

Estimating the Misalignment between the Locations of Profits and Economic Activities of EU’s Banks

Author: Bc. Eliška Jelínková
Year: 2016 - summer
Leaders: doc. Petr Janský Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 51
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/135814/
Abstract: In this thesis we focus on the misalignment of European multinational banks’
profits and the role of tax havens in banks’ taxation. We use the existing
literature and our newly collected data to estimate the difference between the
location of banks’ declared profit and the real economic activity in a given
country. We estimate the impact of unitary taxation using an apportionment
formula on banks’ redistributed tax base as well as on overall tax base in a given
country. We find that banks report their profits disproportionally to their
economic activities in given countries. If profit were apportioned across
countries on the basis of employees and turnover, approximately 60% of the
profits would be redistributed on average each year. Then we focus on where the
main part of a banks’ profit goes and compare the results with an existing list of
tax havens. We conclude that the low–tax countries play a significant role in
profit redistribution of banks and that the related risk of base erosion and profit
shifting is higher for large banks.

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance