This book examines how tax policies contributed to the financial crisis; whether taxation can play a role in the reform efforts to establish a sounder and safer financial system; and the pros and cons of various tax initiatives.

Analytical and empirical perspectives on the interplay of taxation and regulation in the financial sector.

The financial crisis has prompted a reconsideration of the taxation of financial institutions, with practice outstripping principle: France, Germany, the United Kingdom and several other European countries have now introduced some form of bank tax, and the U.S. administration has revived its own proposal for such a charge. This paper considers the structure, appropriate rate, and revenue yield of corrective taxation of financial institutions addressed to two externalities, consequent on excessive risk-taking, prominent in the crisis: those that arise when such institutions are simply allowed to collapse, and those that arise when, to avoid the harm this would cause, their creditors are bailed out. It also asks whether corrective taxation or a regulatory capital requirement is the better way to address these concerns. The results suggest a potential role for taxing bank borrowing, perhaps as an adjunct to minimum capital requirements, at marginal rates that rise quite sharply at low capital ratios (but are likely lower when the government cannot commit to its bailout policy), reaching levels higher than those of the bank taxes so far adopted or proposed.

An overview of bank taxation as an alternative or a compliment to prudential regulation or non-revenue taxation.

This book contains contributions from prominent practitioners and academics presenting their views on the tax levies on the financial sector from a legal and an economic perspective. (New) tax levies on the financial sector have been an ongoing subject of interest since the financial crisis of the past years. In this book, various ways of taxing the financial sector are discussed.

One of the most complex issues in tax policy today is the treatment of the institutions, products, and services that make up the financial sector. It can be harder to ascertain income, expenses, and profits for financial firms than for firms selling goods and services, and it is easier for individuals and firms to manipulate financial transactions so as to exploit tax loopholes. This volume explores the challenges faced by tax policymakers and identifies modern best practices in several areas: banks, insurance companies, securities companies, investment funds, pension funds, and derivatives.

The so-called bank levy - a tax levied on bank leverage - has been proliferated to date. They are the product of reacting to the global financial crisis that started in the autumn of 2008. Therefore, they can only be understood in the context of the crisis. Since one or two decades, the financial industry has produced much innovation that is to be reflected in taxation. The application of bank levy is thus the result of the reforms initiated in the sphere of financial regulation rather than tax law. Financial and tax laws are different from each other in many respects, however, as it will be discussed below where the constitutional background for the introduction of financial taxes will be explored. In this paper, bank levies; one of the newly introduced financial taxes - are in the centre of interest. In this respect, the paper concerns policy options and regulatory framework.