Financial Sector Debt Bias

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Financial Sector Debt Bias

Ms.Oana Luca,Alexander F. Tieman
Financial Sector Debt Bias Book PDF

Author : Ms.Oana Luca,Alexander F. Tieman
Publisher : International Monetary Fund
Page : 28 pages
File Size : 49,9 Mb
Release : 2016-11-10
Category : Business & Economics
ISBN : 9781475552805

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Financial Sector Debt Bias by Ms.Oana Luca,Alexander F. Tieman Pdf

Most tax systems create a tax bias toward debt finance. Such debt bias increases leverage and may negatively affect financial stability. This paper models and estimates debt bias in the financial sector, and present novel estimates for investment banks and non-bank financial intermediaries such as finance and insurance companies. We find debt bias to be pervasive, explaining as much as 10 percent of total leverage for regular banks and 20 percent for investment banks, with the effects most pronounced before the global financial crisis. Going forward, debt bias is likely to once again gain prominence as a key driver of leverage decisions, underscoring the importance of policy reform at this juncture.

Tax Policy, Leverage and Macroeconomic Stability

International Monetary Fund. Fiscal Affairs Dept.
Tax Policy Leverage and Macroeconomic Stability Book PDF

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 78 pages
File Size : 48,9 Mb
Release : 2016-12-10
Category : Business & Economics
ISBN : 9781498345200

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Tax Policy, Leverage and Macroeconomic Stability by International Monetary Fund. Fiscal Affairs Dept. Pdf

Risks to macroeconomic stability posed by excessive private leverage are significantly amplified by tax distortions. ‘Debt bias’ (tax provisions favoring finance by debt rather than equity) has increased leverage in both the household and corporate sectors, and is now widely recognized as a significant macroeconomic concern. This paper presents new evidence of the extent of debt bias, including estimates for banks and non-bank financial institutions both before and after the global financial crisis. It presents policy options to alleviate debt bias, and assesses their effectiveness. The paper finds that thin capitalization rules restricting interest deductibility have only partially been able to address debt bias, but that an allowance for corporate equity has generally proved effective. The paper concludes that debt bias should feature prominently in countries’ tax reform plans in the coming years.

Recognizing the Bias

Mrs. Nina Budina
Recognizing the Bias Book PDF

Author : Mrs. Nina Budina
Publisher : International Monetary Fund
Page : 30 pages
File Size : 46,6 Mb
Release : 2015-11-24
Category : Social Science
ISBN : 9781513527239

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Recognizing the Bias by Mrs. Nina Budina Pdf

This paper argues that asset price cycles have significant effects on fiscal outcomes. In particular, there is evidence of debt bias—the tendency of debt to increase over the cycle— that is significantly larger for house price cycles than stand-alone business cycles. Automatic stabilizers and discretionary fiscal policy generally respond to output fluctuations, whereas revenue increases due to house price booms are largely treated as permanent. Thus, neglecting the direct and indirect impact of asset prices on fiscal accounts encourages procyclical fiscal policies.

Curbing Corporate Debt Bias

Ruud A. de Mooij,Shafik Hebous
Curbing Corporate Debt Bias Book PDF

Author : Ruud A. de Mooij,Shafik Hebous
Publisher : International Monetary Fund
Page : 20 pages
File Size : 50,7 Mb
Release : 2017-02-10
Category : Business & Economics
ISBN : 9781475578294

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Curbing Corporate Debt Bias by Ruud A. de Mooij,Shafik Hebous Pdf

Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.

Tax Biases to Debt Finance

Ruud A. de Mooij
Tax Biases to Debt Finance Book PDF

Author : Ruud A. de Mooij
Publisher : International Monetary Fund
Page : 25 pages
File Size : 52,6 Mb
Release : 2011-05-03
Category : Business & Economics
ISBN : 9781463935139

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Tax Biases to Debt Finance by Ruud A. de Mooij Pdf

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Taxation, Bank Leverage, and Financial Crises

Ruud A. de Mooij,Mr.Michael Keen,Mr.Masanori Orihara
Taxation Bank Leverage and Financial Crises Book PDF

Author : Ruud A. de Mooij,Mr.Michael Keen,Mr.Masanori Orihara
Publisher : International Monetary Fund
Page : 26 pages
File Size : 50,7 Mb
Release : 2013-02-25
Category : Business & Economics
ISBN : 9781475577709

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Taxation, Bank Leverage, and Financial Crises by Ruud A. de Mooij,Mr.Michael Keen,Mr.Masanori Orihara Pdf

That most corporate tax systems favor debt over equity finance is now widely recognized as, potentially, amplifying risks to financial stability. This paper makes a first attempt to explore, empirically, the link between this tax bias and the probability of financial crisis. It finds that greater tax bias is associated with significantly higher aggregate bank leverage, and that this in turn is associated with a significantly greater chance of crisis. The implication is that tax bias makes crises much more likely, and, conversely, that the welfare gains from policies to alleviate it can be substantial—far greater than previous studies, which have ignored financial stability considerations, suggest.

Taxation and the Financial Crisis

Julian S. Alworth,Giampaolo Arachi
Taxation and the Financial Crisis Book PDF

Author : Julian S. Alworth,Giampaolo Arachi
Publisher : Oxford University Press
Page : 321 pages
File Size : 52,8 Mb
Release : 2012-02-23
Category : Business & Economics
ISBN : 9780199698165

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Taxation and the Financial Crisis by Julian S. Alworth,Giampaolo Arachi Pdf

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.

Taxation and Regulation of the Financial Sector

Ruud de Mooij,Gaëtan Nicodème
Taxation and Regulation of the Financial Sector Book PDF

Author : Ruud de Mooij,Gaëtan Nicodème
Publisher : MIT Press
Page : 417 pages
File Size : 45,9 Mb
Release : 2014-12-05
Category : Business & Economics
ISBN : 9780262027977

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Taxation and Regulation of the Financial Sector by Ruud de Mooij,Gaëtan Nicodème Pdf

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

Pouring Oil on Fire: Interest Deductibility and Corporate Debt

Pietro Dallari,Mr.Nicolas End,Fedor Miryugin,Alexander F. Tieman,Mr.Seyed Reza Yousefi
Pouring Oil on Fire Interest Deductibility and Corporate Debt Book PDF

Author : Pietro Dallari,Mr.Nicolas End,Fedor Miryugin,Alexander F. Tieman,Mr.Seyed Reza Yousefi
Publisher : International Monetary Fund
Page : 42 pages
File Size : 42,6 Mb
Release : 2018-12-07
Category : Business & Economics
ISBN : 9781484389102

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Pouring Oil on Fire: Interest Deductibility and Corporate Debt by Pietro Dallari,Mr.Nicolas End,Fedor Miryugin,Alexander F. Tieman,Mr.Seyed Reza Yousefi Pdf

This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and larger firms, with its effect accounting for about a quarter of leverage. The strength of this effect differs with firm size, the availability of collateral, income and income volatility, cash flow, and capital intensity. We conclude that leveling the playing field between debt and equity finance through tax policy reform would decrease NFC leverage, reducing economic risks posited by leverage.

The Effect of Leverage on Asset Sales Between Financial Institutions

Mr.Sonali Das
The Effect of Leverage on Asset Sales Between Financial Institutions Book PDF

Author : Mr.Sonali Das
Publisher : International Monetary Fund
Page : 17 pages
File Size : 47,9 Mb
Release : 2017-09-08
Category : Business & Economics
ISBN : 9781484319055

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The Effect of Leverage on Asset Sales Between Financial Institutions by Mr.Sonali Das Pdf

This paper analyzes how the leverage of financial institutions affects their demand for assets and the resulting value of transactions between financial institutions. The results show a positive relationship between buyer capital and the likelihood of buying assets, and between buyer capital and the value of the deal. That is, those institutions that are the least constrained in their ability to raise funding are those that demand assets and pay more for them. This result does not hold, however, for deposit-taking institutions that had access to several government programs designed to improve their liquidity position during the crisis of 2008.

Global Waves of Debt

M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Global Waves of Debt Book PDF

Author : M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Publisher : World Bank Publications
Page : 403 pages
File Size : 42,6 Mb
Release : 2021-03-03
Category : Business & Economics
ISBN : 9781464815454

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Global Waves of Debt by M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara Pdf

The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Debt Bias and Other Distortions

International Monetary Fund. Fiscal Affairs Dept.
Debt Bias and Other Distortions Book PDF

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 41 pages
File Size : 48,7 Mb
Release : 2009-12-06
Category : Business & Economics
ISBN : 9781498335928

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Debt Bias and Other Distortions by International Monetary Fund. Fiscal Affairs Dept. Pdf

Tax distortions are likely to have encouraged excessive leveraging and other financial market problems evident in the crisis. These effects have been little explored, but are potentially macro-relevant. Taxation can result, for example, in a net subsidy to borrowing of hundreds of basis points, raising debt-equity ratios and vulnerabilities from capital inflows. This paper reviews key channels by which tax distortions can significantly affect financial markets, drawing implications for tax design once the crisis has passed.

The Tax Elasticity System of Corporate Debt

Ruud A. de Mooij
The Tax Elasticity System of Corporate Debt Book PDF

Author : Ruud A. de Mooij
Publisher : Unknown
Page : 27 pages
File Size : 55,9 Mb
Release : 2011
Category : Corporations
ISBN : OCLC:763976353

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The Tax Elasticity System of Corporate Debt by Ruud A. de Mooij Pdf

Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

Financial sector taxation

[Anonymus AC08741538]
Financial sector taxation Book PDF

Author : [Anonymus AC08741538]
Publisher : Unknown
Page : 44 pages
File Size : 47,6 Mb
Release : 2010
Category : Electronic
ISBN : 927918735X

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Financial sector taxation by [Anonymus AC08741538] Pdf

"The global economic and financial crisis has created important needs for fiscal consolidation. This document analyses potential instruments to raise additional tax revenues from the financial sector. The first section reviews the current policy objectives related to the taxation of the financial sector. The second section sheds some light on the current tax treatment of the financial sector. The third section discusses potential tax instruments to reach the goals. The fourth and fifth section respectively assess the advantages and drawbacks of a Financial Transaction Tax and a Financial Activities Tax."--Editor.

Global Financial Stability Report, April 2012

International Monetary Fund. Monetary and Capital Markets Department
Global Financial Stability Report April 2012 Book PDF

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 94 pages
File Size : 46,6 Mb
Release : 2012-04-18
Category : Business & Economics
ISBN : 9781616352479

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Global Financial Stability Report, April 2012 by International Monetary Fund. Monetary and Capital Markets Department Pdf

The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.