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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.

Corporate debt --- Corporations --- Debt --- Debt financing (Corporations) --- Econometric models. --- Finance --- Taxation --- Corporate Taxation --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Tax Evasion and Avoidance --- Public finance & taxation --- Corporate & business tax --- Corporate income tax --- Tax elasticity --- Tax arrears management --- Marginal effective tax rate --- Average effective tax rate --- Tax administration and procedure --- United States

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This paper examines the behavior of indebtedness, consumption, and asset prices in a small open economy in which the foreign real interest rate depends not only on an exogenous world interest rate and on indebtedness, but also on the value of the capital stock, viewed as an implicit “collateral,” and hence on the price of capital. The paper finds that the collateral effect magnifies the intensity of shocks to the economy and the duration of their impact. The collateral effect also generates additional distortions that could lead to overborrowing. The paper discusses the policy responses to these distortions.

Exports and Imports --- Macroeconomics --- Taxation --- Industries: Financial Services --- Business Fluctuations --- Cycles --- International Lending and Debt Problems --- International Financial Markets --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Macroeconomics: Consumption --- Saving --- Wealth --- Tax Evasion and Avoidance --- Price Level --- Inflation --- Deflation --- Finance --- International economics --- Public finance & taxation --- Collateral --- Debt burden --- Consumption --- Tax arrears management --- Asset prices --- Financial institutions --- External debt --- National accounts --- Revenue administration --- Prices --- Loans --- Debts, External --- Economics --- Tax administration and procedure --- United States

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This Selected Issues paper analyzes insolvency and enforcement issues in Greece. The Greek insolvency and creditor rights framework has improved since the onset of the crisis as a result of successive reforms. Nonetheless, it remains underutilized, fragmented, and distortive, and is not supported by an adequate institutional setting. This is because many of the reforms undertaken in recent years were not part of a coordinated and comprehensive nonperforming loan resolution strategy, but were instead piecemeal and taken without proper stakeholder consultation and impact analysis. Also, the frequent and uncoordinated reforms have undermined legal predictability and certainty. This situation of distress, if left unaddressed, affects enterprises, households and financial and public creditors by preventing investment, credit, and consumption from recovering.

Balance of payments --- Fiscal policy --- Taxation --- Duties --- Fee system (Taxation) --- Tax policy --- Tax reform --- Taxation, Incidence of --- Taxes --- Finance, Public --- Revenue --- Economic policy --- Current account balance (International trade) --- International payments, Balance of --- Foreign exchange --- Terms of trade --- Balance of trade --- International liquidity --- Government policy --- Finance: General --- Labor --- Public Finance --- Demography --- Social Security and Public Pensions --- Nonwage Labor Costs and Benefits --- Private Pensions --- Tax Evasion and Avoidance --- Bankruptcy --- Liquidation --- Taxation, Subsidies, and Revenue: General --- Pensions --- Public finance & taxation --- Finance --- Labour --- income economics --- Population & demography --- Pension spending --- Tax arrears management --- Solvency --- Tax administration core functions --- Expenditure --- Revenue administration --- Financial sector policy and analysis --- Tax administration and procedure --- Debt --- Retirement --- Population aging --- Greece

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Understanding the impact of the asymmetric tax treatment of debt and equity on the capital structures of financial institutions is critical to shaping and assessing responses to the problem of excessive leverage that underlay the 2009 financial crisis - but there is no empirical evidence to draw on. Guided by a simple model of banks? financing decisions in the presence of both regulatory constraints and tax asymmetries, this paper explores the impact of corporate tax bias on bank leverage, the use of hybrid instruments and regulatory capital ratios for a panel of over 14,000 commercial banks in 82 countries over nine years. On average, the sensitivity of banks? debt choices proves very similar to that of non-financial firms, consistent with rough offsetting of two opposing effects suggested by the theory. As the model predicts, somewhat counter-intuitively, the impact of tax on hybrids is generally weak or insignificant. Responsiveness to taxation varies significantly across banks, however: those holding smaller equity buffers, and larger banks, are noticeably less sensitive to tax.

Banks and banking --- Debt --- Financial leverage --- Corporations --- Business corporations --- C corporations --- Corporations, Business --- Corporations, Public --- Limited companies --- Publicly held corporations --- Publicly traded corporations --- Public limited companies --- Stock corporations --- Subchapter C corporations --- Business enterprises --- Corporate power --- Disincorporation --- Stocks --- Trusts, Industrial --- Leverage, Financial --- Finance --- Indebtedness --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Financial institutions --- Money --- Taxation --- Econometric models. --- Banks and Banking --- Financial Risk Management --- Investments: Stocks --- Corporate Taxation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Business Taxes and Subsidies --- Financial Institutions and Services: Government Policy and Regulation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Tax Evasion and Avoidance --- Financial services law & regulation --- Corporate & business tax --- Economic & financial crises & disasters --- Investment & securities --- Public finance & taxation --- Capital adequacy requirements --- Corporate income tax --- Deposit insurance --- Taxes --- Financial regulation and supervision --- Financial crises --- Tax arrears management --- Revenue administration --- Asset requirements --- Crisis management --- Tax administration and procedure --- United States