Call for Papers

Taxing Banks Fairly Workshop

Wednesday 2 October 2013

University of Birmingham (UK)


The interdisciplinary AHRC ‘FinCris’ project ( has a work stream entitled: ‘Taxing Banks Fairly’, which is considering the relationship between regulatory ‘taxes’ on risk taking (risk related capital adequacy, and perhaps also deposit insurance premiums, and liquidity and funding risk requirements) and revenue raising taxes (special levies, perhaps related to systemic importance or size or leverage, to compensate taxpayers for underwriting ‘too big to fail’ banks, stamp duties and financial transaction tax (FTT), financial activity tax (FAT), value added tax (VAT), capital gains tax (CGT), income and corporation taxes etc) and their efficiency. While several policy measures, including taxes, levies and regulatory initiatives, are already in place, and a number are still under consideration, the question of how to protect taxpayers from future bank ‘bail outs’ is yet to be resolved satisfactorily and there is a strong possibility that the various regulatory and other taxes will result in double taxation of banks and banking risks; which would be inefficient. Further, the accumulated negative impact of these various taxes on the economic growth is contentious and is a source of concern amongst politicians, academics, and international bodies. Prevailing business tax rules favour debt over equity financing because of the tax deductibility, or business ‘expensing’, of interest on debt, in contrast to the nondeductible costs of servicing equity finance (dividends etc.); which are arguably double taxed because income and profits generated by the underlying investments are also taxed. In order to achieve a fairer treatment of debt and equity, tax expensing should perhaps be removed to give debt equal treatment with equity, at least for banks, at the fulcrum of leveraging; or alternatively an allowance could be made for equity by allowing a deduction for the return on equity (RoE). However, an increased emphasis on core equity will disadvantage small, and especially mutual, saving banks, because they cannot issue equity, and small and medium sized enterprises; which rely heavily on debt, rather than equity, for external financing. The European Commission is proposing to introduce a FTT and the UK has a long established stamp duty on the sale of shares and property. However, the ‘Mirrlees Review’ of the UK tax system and the ‘Henry Review’ of the Australian tax system both counseled against transactions taxes because they are economically inefficient, and instead advocate VAT (GST). Currently, financial services in the EU are exempted from VAT and consequently banks cannot reclaim input tax paid on their purchases. This puts banks at a disadvantage and might tempt them to take excessive risk in search of profits. Whilst VAT (GST) is more efficient, it is operationally more difficult to collect, but New Zealand has demonstrated that the obstacles are not insurmountable. The removal of VAT exemption would impose a burden on the final consumers of financial products and services, but it might reduce wasteful use of financial services and eliminate ‘free banking’ in the UK; which is based on inefficient cross subsidisation.

Please submit papers with a title page containing full contact details and names, job titles and affiliations of the corresponding/presenting authors (and names and affiliations of co-authors) and, on a separate page, an Abstract along with key words by 1st September 2013 to Gabrielle Kelly ([email protected]). We will notify the acceptance or rejection of papers by 15th September 2013.


The format of the conference is designed to allow for as much interaction as possible between the experts from the field. Presentations will be short (around 20 minutes), allowing ample time for discussion. The workshop will conclude with the annual Maxwell Fry Global Finance Lecture (17.15 to 18.45) delivered by Professor CHARLES W. CALOMIRIS, who is Henry Kaufman Professor of Financial Institutions at the Columbia University Graduate School of Business and a Professor at Columbia’s School of International and Public Affairs, entitled: “The Political Economy of Inflation-Tax Banking: Brazil and Mexico in the 19th and 20th Centuries”


For further details, please contact Sajid Mukhtar Chaudhry ([email protected])


We look forward to seeing you in the Business School, University House, on Wednesday 2nd October 2013.

Conference Organisers: Andy Mullineux, FinCris Co-investigator, Bournemouth University and Sajid Mukhtar Chaudhry, FinCris Research Fellow, University of Birmingham