Macroeconomic Effects of Taxes on Banking

Macroeconomic Effects of Taxes on Banking | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Macroeconomic Effects of Taxes on Banking Jose Bosca, Rafael Domenech, Javier Ferri, Juan Rubio-Ramirez This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7142269/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper evaluates the macroeconomic effects of banking taxes—specifically on profits, deposits, and loans—in a small open economy within a currency union, such as the euro area. This analysis is particularly pertinent given the ongoing fiscal reforms in Spain, where such taxes are under parliamentary consideration. Employing a Dynamic General Equilibrium (DGE) model with a detailed banking sector, our findings indicate that these taxes have equivalent effects on macroeconomic variables. Banks respond to higher taxes by increasing mark-ups and passing on costs through elevated loan interest rates, thereby raising financial intermediation costs. While these taxes enhance government revenues, they lead to a long-term decline in GDP, higher loan rates, and reductions in credit, deposits, and bank capital. The analysis reveals a trade-off between revenue generation and economic activity, with a GDP-to-revenue multiplier near -1, independent of the tax rate. These results underscore the necessity for careful design of fiscal policies targeting the banking sector to minimize adverse economic impacts while achieving revenue objectives. JEL Classification: E30, E32, E43, E51, E52, E62. banking taxes DGE capital loans deposits Full Text Additional Declarations Competing interest reported. While one of the co-authors is employed by BBVA Research, a technically independent unit within BBVA Group, the views expressed in this article are solely those of the authors and do not necessarily reflect those of BBVA or its affiliates. The research was conducted with full autonomy and according to academic standards. Although the topic relates to bank taxation, and thus may be relevant to the banking industry, no institutional interests have influenced the results. The authors declare no conflict of interest. Supplementary Files OnlineAppendixnonames.pdf Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7142269","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":502066236,"identity":"78169182-c2f6-4f4a-a418-260160214bbb","order_by":0,"name":"Jose Bosca","email":"","orcid":"","institution":"University of Valencia","correspondingAuthor":false,"prefix":"","firstName":"Jose","middleName":"","lastName":"Bosca","suffix":""},{"id":502066237,"identity":"ce2950ae-f795-4943-a60a-a51c80c30f7d","order_by":1,"name":"Rafael Domenech","email":"","orcid":"","institution":"University of Valencia","correspondingAuthor":false,"prefix":"","firstName":"Rafael","middleName":"","lastName":"Domenech","suffix":""},{"id":502066239,"identity":"c80b67fe-e7ba-4600-84fd-d8eacd98e8f1","order_by":2,"name":"Javier Ferri","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA4klEQVRIie3QMQrCMBTG8YQHzRLsmlLQK6QU1M2r1EUnwUlwKZGuXqC3cHJyiBTs0gM4VgR3F6ng4ItDnYyODvkPjy4/+rWEuFx/GFPmSnNojUd0vxKuWwLmivhHQlpCxuorCYtL3czTnk+Anpe74XRzTOipsZHOZBCtZRHlCiCqLmKGBGJuISNO+iGROpHaPwRKI6m0F1qHcXZDkiIBdkcylZVmd+swzs1bwBCPIklkqTxiG4ZkEby+JQMww6K8XGWhnbCtaB74x1hGr0qnvU4B+6tt2Dton6j6CbhcLpfrc0+sL0Ig7N0wvwAAAABJRU5ErkJggg==","orcid":"","institution":"University of Valencia","correspondingAuthor":true,"prefix":"","firstName":"Javier","middleName":"","lastName":"Ferri","suffix":""},{"id":502066240,"identity":"06e6fc5e-a2c2-4d35-a6a7-f82829bd4494","order_by":3,"name":"Juan Rubio-Ramirez","email":"","orcid":"","institution":"Emory University","correspondingAuthor":false,"prefix":"","firstName":"Juan","middleName":"","lastName":"Rubio-Ramirez","suffix":""}],"badges":[],"createdAt":"2025-07-16 17:08:11","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7142269/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7142269/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":99314260,"identity":"980b65d8-5d33-4fa2-ab21-235ac9ce8728","added_by":"auto","created_at":"2025-12-31 16:21:04","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":529507,"visible":true,"origin":"","legend":"","description":"","filename":"BDFRTBJFSR.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7142269/v1_covered_e0917f51-1785-42ff-a1a9-b367aa212d0f.pdf"},{"id":89790270,"identity":"139dea0c-ced2-4765-954f-c9a9621ed3db","added_by":"auto","created_at":"2025-08-25 05:35:25","extension":"pdf","order_by":0,"title":"","display":"","copyAsset":false,"role":"supplement","size":190497,"visible":true,"origin":"","legend":"","description":"","filename":"OnlineAppendixnonames.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7142269/v1/76b95039173d6fd45deebe18.pdf"}],"financialInterests":"Competing interest reported. 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