economic papers. n° 152. are international deposits tax

ECONOMIC PAPER

http://europa.eu.int/economy_finance

Number 152 June 2001

Are international deposits tax-driven?by

Harry Huizinga

and Gaëtan Nicodème

Directorate General for

Economic and Financial Affairs

ECFIN/292/01-EN

3

$UH�,QWHUQDWLRQDO�'HSRVLWV�7D[�'ULYHQ�"

Harry Huizinga*

European Commission

and

Gaëtan Nicodème*

European Commission

This draft: May 2001

$EVWUDFW� This paper investigates the impact of tax policy on international depositing.Non-bank international deposits are shown to be positively related to interest income andwealth taxes and to the presence of domestic bank interest reporting. This suggests thatinternational deposits are in part intended to facilitate tax evasion. The tax sensitivity ofinternational deposits is estimated to be higher in 1999 than before. At present, only partof international interest flow are covered by either non-resident interest withholding taxesor international exchange of information. This incomplete coverage may be a reason thatthese policies currently appear to have little impact on international depositing.

* The findings, interpretations, and conclusions expressed in this paper are entirelythose of the authors. They should not be attributed to the European Commission.

5

�� ,QWURGXFWLRQ

Countries typically tax the worldwide interest income of their residents. By now,

the tax authorities in most OECD countries require domestic banks to report interest

payments to domestic residents. In contrast, no comprehensive system of international

exchange of bank interest information exists to date. This, combined with the generally

low taxation of international bank interest at source, implies that the international

recipient of bank interest can evade all taxation of this income with relative ease. In the

minds of European policy makers, this has been a serious problem since at least the

1980s, as evidenced by the introduction in 1989 of a first proposal for a European

directive towards a common minimum withholding tax on interest. In 1998, a second

proposal for a directive was published that gave EU member states the option to tax

interest accruing to non-residents at source or to exchange information with other

countries. At a recent European Council meeting in November 2000, the European Union

has agreed that from 2010 onwards international information exchange will be the

mechanism to shore up the taxation of international interest flows. Until then, several

countries, namely Austria, Belgium and Luxembourg, will be free to levy a minimum

withholding tax instead, with the understanding that 75 percent of the tax revenues are

passed on to the residence-country tax authorities. This set of policy intentions is to be

laid down in a binding directive by the end of 2002, on the condition that the European

Union reaches agreement with several third countries, notably Switzerland, on the

adoption of similar anti-evasion measures in these countries.

The adoption of a directive in the area of international interest taxation would be

the first major international agreement in the area of capital income taxation, or for that

matter of direct taxation in general. The further development of policy in this area (to

include, say, countries outside the EU, or to extend coverage to dividends) is hampered

by a lack of empirical analysis of international interest tax evasion. A main impediment

to research in this area has been the limited data on the international ownership of bank

deposits and other financial assets. Countries are presumably restricting access to this

data to protect the employment and profits of their domestic banking sectors. More

discussion at the international level of the potential roles of banks in tax evasion and

money laundering schemes may some day force more openness, but for now data on

6

bilateral banking flows remains confidential. Data of this kind, however, is collected by

the Bank for International Settlements (BIS), and has been made available for this study

on the condition that data on bilateral banking flows is not disclosed.

The main purpose of this paper is to see to what extent international banking

flows reflect tax policy and efforts to enforce it. Tax determinants first are the residence-

based interest income and wealth taxes that GH�MXUH typically apply to worldwide income

and wealth. To aid enforcement, many countries by now require their banks to report

interest payments to domestic residents to the tax authorities. To enable international

enforcement, banking countries in some instances also supply information to foreign tax

authorities. Data on both types of information provision have been collected for this

paper. Finally, the analysis also takes into account that international interest payments

may be subject to an interest withholding tax in the source country.

Our empirical results suggest that high income and wealth taxes elicit

international depositing. Domestic interest reporting also appears to contribute to

international bank placements. There is less evidence that interest withholding taxes

discourage such depositing. Possible reasons are that non-resident withholding taxes are

typically at rather low levels and imposed by relatively few countries. Similarly, there is

little evidence that international information exchange – for 1999 data – has a strong

impact on bilateral depositing. Again, a reason may be the haphazard pattern of

international information exchange at present. Truly generalized withholding taxes or

information exchange in principle affects the international depositing decision as much as

domestic tax policy, and hence can be expected to have a significant impact on

international depositing patterns.

Several authors have previously examined the determinants of international

banking flows. Grilli (1989) relates non-bank and inter-bank deposits to interest and

dividend taxes, capital flows, an index of bank secrecy, GNP, and a trend. He finds that

non-bank deposits are influenced by taxes on interest and by bank secrecy, while inter-

bank deposits are driven by the size of the source economy and by the taxation of

dividends (suggesting that bank accounts might be used to park money meant for later

financial transactions). Alworth and Andresen (1992) further estimate a gravity model to

7

explain the determinants of non-bank bilateral deposit flows using data up to 1990.1

These authors include several bank-system variables such as the (bilateral) difference in

reserve requirements, the bank-country interest withholding tax, and an index of its bank

secrecy. The withholding tax and bank secrecy variables, as part of interacted variables,

are shown to be determinants of cross-border deposits. More recently, Fornari and Levy

(2000) have estimated the determinants of bilateral cross-border deposits inflows for a

group of 6 industrialized countries. These authors place special emphasis on financial

structure variables such the stock market capitalization to GDP, stock market volatility

differences and the trading volume of the stock market. As Alworth and Andresen

(1992), the present paper examines the determinants of non-bank bilateral international

depositing with a focus on taxation. This paper differs, however, in that we have

somewhat more detailed information on the tax regime and the availability of bank

information to tax authorities. In particular, the present paper includes personal interest

income and wealth taxes and distinguishes between the domestic and international

availability of bank information to tax authorities.

Several theoretical papers have also examined tax policy towards mobile financial

capital. Janeba and Peters (1999), for instance, consider the issue of discrimination

against internationally mobile capital given that countries set tax rates non-cooperatively.

Huizinga and Nielsen (2000a) show that an internationally agreed minimum withholding

tax on interest, that is only binding for a small country, can benefit all countries, if in fact

all countries are induced to increase their interest tax rates. Bacchetta and Espinosa

(1995) argue that it may be in a country’s own interest to provide information about bank

interest payments to non-residents, as this enables the interest-receiving country to

increase its own income tax rate. This in turn reduces the incentive for residents of the

information-providing country to place their savings abroad. In a repeated game

framework, Bacchetta and Espinoza (2000) further study the joint determination of taxes

on international investment income and information-exchange clauses in double taxation

1 Recently, several papers have also applied the gravity approach to investigate capital flows otherthan cross-border deposits. Portes and Rey (1999), for instance, show that bilateral portfolio equityinvestments reflect variables proxying (private) information availability, such as international telephonecalls and multinational bank branches. Along similar lines, Ahearne, Griever, and Warnock (2000) find thatU.S. holdings of a country’s equities are positively related to the share of that country’s stock market that is

8

treaties. They find that information exchange may be part of a (sustainable) tax treaty if

there is a reciprocity requirement, when there is a high cost of negotiation, or with one-

way capital flows. Also in a repeated game setting, Huizinga and Nielsen (2000b)

examine countries’ exclusive choice between non-resident withholding taxes and

information exchange (as provided for by the European Commission’s draft directive of

1998). Two countries choosing the same regime (either withholding taxes or information

exchange) and a mixed regime (one country choosing withholding taxes and the other

information exchange) are all possible equilibria of the regime selection game.

Information exchange performs relatively well, and is more likely to be chosen in

equilibrium, if governments apply a relatively low discount rate to future outcomes. In

the following, section 2 discusses the data used in this study. Section 3 presents the

empirical results, and section 4 concludes.

�� 7KH�GDWD

�� ,QWHUQDWLRQDO�GHSRVLWV

The BIS has collected data on the external liabilities of reporting country banking

systems since 1983, and on external deposits in 1996. The external liabilities and deposits

of BIS reporting countries for 1999 are reported in Table 1. These figures represent all

currencies. From the table, we see that the UK and the US have the largest external

liabilities at ¼��WULOOLRQ�DQG�¼��WULOOLRQ��respectively. Among the smaller countries, the

Cayman Islands and Switzerland have about ¼� �� WULOOLRQ� LQ� foreign liabilities, while

Luxembourg has around ¼�� WULOOLRQ��The total external liabilities of banks in the BIS

area amount to ¼� �� WULOOLRQ�� 7RWDO� liabilities are divided between bank and non-bank

liabilities. As seen in the second column, non-bank liabilities are less than half of total

liabilities in all reporting countries. For the BIS area, non-bank liabilities stand at 24

percent of total liabilities. Interestingly, non-bank liabilities are highest in Switzerland

and the Cayman Islands at 48 and 42 percent of total liabilities, respectively. External

deposits are represented in the third column. External deposits are shown to be the lion’s

share of external liabilities. For the BIS area as a whole, external deposits are 92 percent

listed on U.S. exchanges. This is attributed to the fact that a listing in the U.S. lowers information costs forU.S. investors.

9

of external liabilities. The last column indicates that non-bank external deposits are 25

percent of total external deposits.

It is also interesting to consider to what extent a country’s residents maintain

deposits abroad. To proceed, let GLM�be the deposits in country L�owned by the residents of

county M� We can now define country M’s exports of deposits (as part of capital exports) or

(M, and country L’s imports (as part of capital imports) or ,L as follows,

(M�� ∑L

LMG

,L�� ∑M

LMG

To see how important these deposit exports and imports are, we can relate them to

the total deposits in a country’s banking system and to the ownership of deposits by a

country’s residents. Specifically, let 'L be the total deposits in country L’s banking

system. The worldwide ownership of deposits by residents of country L then can be

defined as 2L� �'L��(L�±�,L��The share of deposits owned by residents of country L held

abroad is given by LV =

LL2( / . Net deposit imports cause a country’s banking system to

be larger that it would otherwise be. We can define the expansion rate of a country’s

banking system on account of its net deposit imports as LJ =

LLL2(, /)( − . This

expansion is measured relative to the hypothetical case where the banking system exactly

accommodates the deposits owned by the country’s residents. The expansion rate is a

rough index of how much a particular banking system gains or loses on account of its net

deposit imports.

Table 2 provides data on aggregate deposit exports and imports and other derived

variables for 1998.2 Switzerland and the United Kingdom are shown to be net exporters

of deposits (bank and non-bank deposits together) from the first 2 columns, while they

are net importers of non-bank deposits from the last 2 columns. Net inflows of non-bank

deposits thus are more than off-set by net outflows of bank deposits. At any rate,

incoming non-bank deposits are recycled as outgoing bank deposits. Conversely, the

United States is a net exporter of non-bank deposits, and a net importer of bank deposits

(as net exports of non-bank deposits exceed net exports of overall deposits). Other net

10

exporters of non-bank deposits are Australia, France, Italy, Japan, Norway, and Spain.

Next, we turn to the share of deposits owned by residents held abroad. Here Switzerland

leads with 88 percent, which reflects the high gross exports of deposits from Switzerland.

Australia, Canada, and Norway have foreign shares of the deposit ownership at less than

20 percent, reflecting relatively closed banking systems. Finally, we consider the

expansion rate of the banking system due to net deposit imports. Canada and Germany

are shown to have net deposit imports that exceed 10 percent of deposit ownership.

Switzerland is a large net deposit exporter, and on the basis of this is calculated to have a

banking system ‘expansion’ rate of –38 percent. To increase the national coverage

somewhat, Table 3 provides information on exports and imports of bank liabilities rather

than bank deposits. Hong Kong registers as an additional net exporter of non-bank

liabilities, while the Bahamas is shown to be a strong net importer of non-bank liabilities.

�� 7KH�WD[�V\VWHP

Countries typically tax different types or income at different rates. Since 1983,

increasingly many countries have opted for dual tax systems with different tax rates for

earned and capital income. Capital income may again be taxed differently depending on

whether it takes the form of interest, dividends, or capital gains. In practice, even finer

gradations are found (especially with respect to international capital income flows) where

separate rates of tax are applied to bond interest, bank interest, or interest from a loan

secured by real estate. Wealth taxes tend to be less specific, although some countries

make distinctions between taxes on financial wealth (which could be divided into

portfolio wealth or business ownership), and real estate. Throughout, we have attempted

to identify the taxation of interest from deposits and wealth in the form of deposits as

regards individuals.

Table 4 provides the effective interest income and wealth taxes applied to bank

deposits in 1999 in most BIS reporting countries. Both taxes generally apply to

worldwide interest income and wealth, and take into account sub-national taxation of

interest in several cases, such as Canada and Denmark. In 1999, Austria, Belgium,

2 We chose 1998 as the total banking system deposits published for 1999 by euro-area countriesinclude shares in money market funds.

11

Finland, France, Greece, Ireland, Italy, Japan, Portugal, Sweden, and the United

Kingdom maintained dual (or multiple) income tax systems with a relatively low tax rate

for interest income. In all these cases, the dual income tax system was introduced during

the 1983-1999 period. These introductions were probably at least in part meant to reduce

the incentive to evade the taxation of domestic capital income such as interest income3.

Since 1983, the average interest income tax has declined gradually as seen in Figure 1.

The decline took place during a period of liberalization of capital movements.

Table 4 also provides information about wealth taxes in place in 1999. Since

1983, several countries have eliminated their wealth taxes (Austria’s ended by 1994,

Denmark’s by 1997, and Germany’s by 1997). France relinquished its ‘old’ wealth tax by

1986, to introduce a ‘new’ wealth tax in 1988. Overall, the average wealth tax has

declined significantly since 1983 (see Figure 2). Finally, we turn to non-resident interest

withholding taxes, as given in Table 5.4 In 1999, only 4 countries in the table levy

positive withholding taxes on any outgoing bank interest flows. This reflect that bank

interest is often favored over other types of interest. The U.S., for instance, has

maintained a statutory exemption for bank interest throughout the period under

consideration, even though it levied a non-resident (non-treaty) interest withholding tax

of 30 applied to, say, Eurobond interest till the late 1980s. The U.K. similarly exempts

bank interest on bank claims with a maturity of less than a year including regular current

account and savings account deposits. Switzerland is a major financial center that

continues to tax the bank interest accruing to non-residents, even though also this country

has reduced the non-treaty tax rate of 35 percent to 12.5 percent or less in all but 5 cases

in the table. Austria and France are among the countries that have abolished non-resident

withholding taxes in 1993 and 1997, respectively. Overall, the average nonresident

interest withholding tax has declined since 1983, as seen in Figure 3.

3 Recent tax reforms continue the movement away from synthetic income tax systems. At the startof 2001, the Netherlands also introduced a dual system with a tax rate of 30 percent on a (deemed) returnon capital income of 4 percent. This amounts to a wealth tax of 1.2 percent per annum to replace theprevious wealth tax of 0.7 percent.4 See also Zee (1998) for an exposition of the role of withholding taxes in taxing internationalportfolio income.

12

�� $FFHVV�WR�EDQN�LQIRUPDWLRQ�DQG�LQWHUQDWLRQDO�LQIRUPDWLRQ�H[FKDQJH

Taxes on bank interest that are not withheld by the paying bank have to be

collected from the depositor. To make enforcement in this case realistic, the tax authority

needs to have independent access to bank information. Access to bank information for tax

purposes, either domestic or international, has been far from straightforward, as

documented in a comprehensive recent report by the OECD (2000). A first requirement is

that the banks themselves maintain the information that is required for tax enforcement

and that they do not open anonymous or numbered accounts. As indicated by OECD

(2000), the vast majority of OECD tax authorities can obtain bank information to combat

domestic tax evasion. Information provision – either domestic or international – can be

categorized as spontaneous (on the initiative of the information provider), on request, or

automatic. Tax authorities that request specific account information have to follow due

procedures – administrative or legal – to make the request. To make specific requests, tax

authorities need to already have some specific information on which to base the request.

Information provided on request is thus not likely to lead to across-the-board tax

enforcement.

This leaves the automatic and periodic provision of bank information as the only

viable way to enforce taxation. As seen in OECD (2000, Appendix 1) 15 OECD countries

require their banks to generally report ‘interest paid and to whom it is paid’. These

countries were requested to indicate when they started to require their domestic banks to

automatically report interest payments to domestic residents. The answers received are

reflected in Table 6. As seen in the table, during the 1980s and early 1990s several

countries additionally required domestic interest reporting. By 1999 about two thirds of

the countries required automatic domestic information provisioning regarding interest

payments.

International automatic information exchange requires some international legal

agreement – in addition to domestic regulation. The legal basis can be a bilateral tax

treaty, which in many cases is modeled after the OECD Model Convention on Income

and Capital. Article 26 of this convention requires contracting States to ‘exchange such

information as is necessary for carrying out the provisions of this Convention or of the

domestic laws of the Contracting States concerning taxes covered by the Convention

13

insofar as the taxation thereunder is not contrary to the Convention’. All OECD members

except Luxembourg and Switzerland can obtain bank information for the purpose of

exchange of information under tax treaties as set out in the Model Convention.5 Several

multilateral agreements that can serve as a basis for information exchange exist as well.

For instance, the European Union has adopted several directives that enable member

states to exchange information within the EU on direct and indirect tax matters.6 The

joint OECD/ Council of Europe Multilateral Convention on Mutual Administrative

Assistance in Tax Matters, which has been ratified by 8 countries (Denmark, Finland,

Iceland, the Netherlands, Norway, Poland, Sweden, United States), also permits countries

to exchange information on direct and indirect tax matters. Finally, the Nordic

Convention on Mutual Administrative Assistance in Tax Matters allows the Nordic

countries to exchange bank and other information for all kinds of taxes except import

duties. Unlike the other multilateral agreements, the Nordic Convention calls for the

automatic exchange of bank information.

In its survey, the OECD found that 11 members (Australia, Canada, Denmark,

Finland, France, Japan, New Zealand, Norway, Sweden, United Kingdom, the United

States) provided bank information automatically to (some) treaty partners. We requested

these countries to provide additional information about their recipient countries and the

history of this automatic information exchange. Table 7 summarizes the resulting data

about the history of bilateral information exchange. Several countries (Australia, Finland,

and Norway) mentioned their treaty partners as recipients, but more generally countries

supply information automatically to a more selective and changing list of countries. The

OECD report mentions that Australia, Canada, Denmark, France, Norway and Sweden

exchange bank information automatically based in part on reciprocity. As recipient lists

of countries vary from year to year and institutional memories are short, it is impossible

to construct an accurate history of bilateral automatic information exchange.

On the basis of survey responses, however, one can get a relatively complete

picture of automatic information exchange in the BIS-area for 1999 (see Table 8 ). From

the table, we can see to what extent information exchange in practice occurs on the basis

5 Countries that agree to exchange information automatically typically do not write this into theirbilateral tax treaty, but instead conclude a separate memorandum of understanding.

14

of reciprocity. Specifically, in the table there are 288 unidirectional entries for which we

also know whether information flows in the other direction. Of these, 67 entries signal the

presence of international information exchange. Of these 67 entries, 30 one-way

exchanges are reciprocated (i.e. there are 15 pairs of bilateral information exchange). To

measure the degree of reciprocity, we constructed 2 dummy variables, each indicating the

presence or absence of information flows in one direction. The correlation coefficient

between these two dummy variables is found to be 0.28 and to be significant at the 1

percent level. This is evidence of reciprocity of information exchange.

A separate issue is whether information exchange, as reflected in Table 8, and

withholding taxes, as reflected in Table 5, are complements or substitutes. To investigate

this, we note that there are 440 entries in either table for which we know whether there is

information exchange as well as the relevant withholding tax rate. Breaking down these

440 entries, we find there are 68 entries with only information exchange, 51 entries with

only a withholding tax, 17 entries with both, and finally 304 entries with neither. The 17

entries with joint information exchange and withholding taxation all pertain to Australia

(as a bank country). Apart from Australia, information exchange and withholding taxes

thus are substitutes rather than complements.

�� (PSLULFDO�UHVXOWV

This section examines the empirical relationship between tax policy and the

external liabilities of the banking system. As our main interest is in tax policy at the

personal level, we only consider non-bank external liabilities and deposits. Following

Alworth and Andresen (1992), we use BIS data on bilateral external liabilities and

deposits. Bilateral data is preferred as this allows us to include tax and other information

concerning the bank country, the customer country, and their bilateral relationship. The

regression analysis starts from the following estimating equation:

LMWLMWLMMWMLWLLMW;;;, εβββα ++++= 0

6 In particular, see directives 77/799/EEC, 79/1070/EEC, and 92/12/EEC.

15

where ,LMW is the independent variable denoting funds held in country L’s banks by non-

bank residents of county M� (either QRQ�EDQN� H[WHUQDO� OLDELOLWLHV� or QRQ�EDQN� H[WHUQDO

GHSRVLWV); next, ;LW are bank country variables (e.g., UHDO�*'3), ;MW are customer country

variables (e.g., the ZHDOWK� WD[), and ;LMW are characteristics of the bilateral relationship

between the bank and the customer countries (e.g., GLVWDQFH). The vector ;LW� only contains

non-tax-policy controls, while the vectors ;MW��and ;LMW contain tax policy variables as well

as controls. Further, α0 is a constant, the β's are vectors of coefficients, and εLMW is an error

term. Finally, several regressions include year dummy variables to capture time-specific

effects, and country dummies to capture specific effects related to the bank and customer

countries.

The regressions reported in Table 9 use pooled cross-section time series data. The

dependent variable regressions in (1)-(3) is QRQ�EDQN� H[WHUQDO� OLDELOLWLHV covering the

period 1983-1999. The dependent variable in columns (4)-(6) instead is� QRQ�EDQN

H[WHUQDO�GHSRVLWV for the period 1996-1999. Unreported year dummies are included in all

regressions. In addition, regressions (2), (3), (5) and (6) include unreported bank-country

dummies, while regressions (3) and (6) further include customer-country dummies. In all

regressions, non-tax control variables include each country’s UHDO�*'3, its EDQN�LQWHUHVW

VSUHDG, its degree of UXOH� RI� ODZ, and dummy variables identifying the origin of each

country’s legal system. %DQN� LQWHUHVW� VSUHDG is a measure of the spread between a

banking system’s lending and deposit interest rates, and serves as an index of bank

efficiency. Systems with low interest spreads are attractive to bank customers, and hence

savers in countries with relatively inefficient banks are expected to take their deposits to

countries with relatively efficient banks. Several estimated coefficients on the two EDQN

LQWHUHVW�VSUHDG�variables in the table are statistically significant and consistent with this.

Variables identifying legal system origin are included following research by La

Porta et al. (1997) showing that the outside equity and debt finance raised by firms

depends importantly on the legal system. These authors distinguish legal systems of

English, French, German and Scandinavian origins. The regressions in the table include

dummy variables denoting only the three latter types of system. Negative estimated

coefficients for these legal origin variables - for bank and customer countries alike -

suggest that parties in countries with non-English legal traditions participate less in

16

international depositing. Control variables characterizing the bilateral relationship

between bank and customer country include two international trade variables, and the

GLVWDQFH, FRQWLJXLW\, and FRPPRQ�ODQJXDJH�variables. More intense international trade, a

smaller distance, geographical contiguity and a common language are expected to

contribute to external bank liabilities. The estimated coefficients in the table largely

confirm these expectations.

Turning to tax policy, the LQFRPH�WD[�[�GHSRVLW�UDWH�variable is constructed as the

customer-country income tax rate times its deposit interest rate. This variable measures

the interest tax burden that the bank customer faces if he were to deposit at home. In

columns (1) and (3), this tax variable obtains positive and significant coefficients. The

estimate of 0.043 in column (2) implies that a 1 percent increase in the interest tax burden

would cause a relatively modest increase in external bank liabilities of 4.3 percent. Next,

the ZHDOWK� WD[ variable simply is the wealth tax rate. It enters columns (2), (4), and (5)

with positive and significant coefficients. Note that the estimated coefficient on the

wealth tax in column (2) is about 4 times as large as the coefficient for the income tax

variable. Bank customers subject to the wealth tax no doubt are relatively wealthy, and

perhaps have been more prone to place funds abroad to evade domestic taxation. The

final indicator of customer-country tax policy is the GRPHVWLF�LQIRUPDWLRQ�variable. This

is a dummy variable flagging the existence of automatic interest information provisioning

to domestic tax authorities. This variable enters columns (1)-(3) with positive and

significant coefficients. The estimated coefficient of 0.247 in column (3) suggests that

such domestic information provisioning increases external bank placements by 28

percent.

Next, we turn to bank-country tax policy. :LWKKROGLQJ� WD[� [� GHSRVLW� UDWH is

constructed as the non-resident interest withholding tax levied by the bank country times

this country’s deposit interest rate. This variable thus measures the withholding tax

burden the international bank customer faces in the bank country. This variable enters all

regressions in the table with negative coefficients, but only significantly in column (1).

This reflects that the inclusion of bank country dummies in column (2) suffices to render

17

the coefficient on the withholding tax variable insignificant. This is not very surprising

given that most of the variation in the withholding tax rate is across bank country.7

The non-resident interest withholding tax presumably affects a saver’s choice of

foreign bank location as much as the more fundamental choice of whether to bank abroad

at all. Hence, estimated coefficients on the withholding tax variable may mostly reflect

savers’ substitutions among various international banking destinations. Regressions with

bilateral data thus cannot tell us directly how aggregate foreign banking would respond if

all countries were to raise their withholding taxes (or alternatively were to exchange

information). A priori, however, the response should be similar to that following an

equal-sized reduction in the domestic tax burden on bank holdings. The reason is the

foreign banking trade-off depends on the net tax savings that can be achieved by banking

abroad. This net benefit is affected equally by an increase in foreign taxes and a reduction

in domestic taxes. Our empirical results, as discussed, suggest that the foreign banking

response to domestic taxation is considerable, and hence the response to a comprehensive

increase in effective international taxation should be significant as well.

Next, we turn to a set of largely similar regressions with data for 1999 as

represented in Table 10. This is the most recent year for which data is available, and of

course the first year after the introduction of the euro. The focus on 1999 allows the

inclusion of the additional LQWHUQDWLRQDO� LQIRUPDWLRQ variable signaling the international

exchange of interest information on a bilateral basis. The regressions in Table 10 do not

include the international trade variables, as this would reduce the sample size by half. In

column (2), we see that the estimated coefficient on the LQFRPH�WD[�[�GHSRVLW�UDWH variable

is 1.461, much larger than the corresponding estimate of 0.043 in Table 10. The figure of

1.461 suggests that a 1 percent increase in the domestic interest tax burden causes foreign

placements to rise by 146 percent. To interpret this, note that a 1 percent rise in the

interest tax burden requires an income tax rate increase of 20 percent if the deposit

interest rate is 5 percent. Outward-bound deposits typically are only a fraction of the

domestic deposit base (for instance, deposit exports are 8 percent of total banking system

deposits for Norway in 1998, as calculated from data in Table 2). This implies that the

7 Eijffinger, Huizinga and Lemmen (1998) have previously shown empirically that non-residentwithholding taxes are positively related to government debt yields.

18

percentage reduction in domestic banking system deposits is generally far less than the

percentage increase in external deposits (if we assume a one-for-one substitution). All the

same, the estimated foreign banking response to domestic taxation for 1999 is sizeable.

The estimated coefficients for the ZHDOWK� WD[ variable is 1.087 in column (2) of

Table 10, which is also far more than the corresponding estimate of 0.190 in column (2)

of Table 9. Note that the estimated coefficients on the income and wealth tax variables

are of comparable size in columns (2) and (5) of Table 10. The most recent data thus

suggest that the income and wealth tax burdens have a comparable impact on foreign

bank placements. The remaining tax policy variables are the GRPHVWLF� LQIRUPDWLRQ and

LQWHUQDWLRQDO� LQIRUPDWLRQ variables and the ZLWKKROGLQJ�WD[�variable��All three variables

fail to be statistically significant at the 5 percent level in any of the regression reported in

Table 10. One reason may be that by 1999 domestic information provision and zero

withholding taxes have become the norm so that the associated variables display

relatively little variation in 1999.

The LQWHUQDWLRQDO� LQIRUPDWLRQ variable further may not prove to be significant if

the exchange of information, as currently organized, fails to bring about an effective tax

enforcement. Also, international information exchange will not have a noticeable effect,

if savers by 1999 do not recognize that tax authorities ‘automatically’ swap information

about particular international interest payments. At the same time, by 1999 international

information exchange was far from comprehensive so that savers continued to have

access to ‘trusted’ foreign banking systems with strong reputations for bank secrecy.

Continued access of this type of foreign banking could make information exchange by

any subset of countries ineffectual.

�� &RQFOXVLRQ

This paper has investigated the impact of tax policy on international depositing.

The empirical results indicate that external deposits are positively related to interest

income and wealth taxes, and to the presence of domestic bank interest reporting. This is

evidence that international deposits are in part intended to facilitate tax evasion. The tax

sensitivity of international deposits appears to be higher in 1999 than before. This is to be

expected, as advances in ICT have reduced the costs of international banking. People also

19

have become wealthier so that any fixed costs of setting up foreign bank accounts are

more easily overcome. Perhaps in response to increased tax sensitivities, countries have

substantially reduced the taxation of interest income in the last two decades. In fact, the

average interest income tax, financial wealth tax, and non-resident interest withholding

tax all have been almost halved since 1983. In several countries, this has taken the form

of dual income tax regimes with a reduced taxation of interest and other capital income.

As interest withholding taxes have been reduced or eliminated, the international

exchange of information becomes potentially more important to ensure a reasonable

taxation of international interest flows. A simple count of bilateral international

relationships reveals that by 1999 the automatic exchange of information is already as

prominent as withholding taxes. Doubts, however, remain about its effectiveness at

present. Some common protocol regarding tax identification numbers, for instance, still

needs to be enacted to boost effectiveness. Also, the international exchange of

information has to cover most industrialized countries and other financial centers to be

truly effective. All this implies that international cooperation is necessary to shore up the

taxation of international interest flows. EU member states have stated their intention in

November 2000 to make information exchange the main mechanism to ensure interest

taxation internationally by 2010. Actual implementation, however, has been made

conditional on whether sufficient cooperation with several non-EU financial centers – in

the eyes of EU member states – can be achieved.

20

5HIHUHQFHV

Ahearne, Alan G., William L. Griever, and Francis E. Warnock (2000), Informationalcosts and home bias: an analysis of U.S. holdings of foreign equities, ,QWHUQDWLRQDO)LQDQFH� 'LVFXVVLRQ� 3DSHU� ��, Board of Governors of the Federal Reserve System,Washington D.C.

Alworth, Julian S. and S. Andresen (1992), The determinants of cross border non-bankdeposits and the competitiveness of financial market centres, 0RQH\�$IIDLUV 5, 105-133.

Bacchetta, Philippe and Maria Paz Espinosa (1995), Information sharing and taxcompetition among governments, -RXUQDO�RI�,QWHUQDWLRQDO�(FRQRPLFV 39, 102-21.

Bacchetta, Philippe and Maria Paz Espinosa (2000), Exchange-of-information clauses ininternational tax treaties, ,QWHUQDWLRQDO�7D[�DQG�3XEOLF�)LQDQFH 7, 275-93.

Bank for International Settlements (2000), International Banking and Financial MarketDevelopments, %,6�4XDUWHUO\�5HYLHZ, Basel, Switzerland.

Coopers & Lybrand, ,QWHUQDWLRQDO�7D[�6XPPDULHV.

Eijffinger, Sylvester, Harry Huizinga and Jan Lemmen (1998), Short-term and long-termgovernment debt and non-resident withholding taxes, -RXUQDO� RI�3XEOLF�(FRQRPLFV 68,309-334.

European Commission (1998), Proposal for a council directive to ensure a minimum ofeffective taxation of savings income in the form of interest payments within theCommunity, 2�-�(�&., COM(1995) 295 final.

Fornari, Fabio and Aviram Levy (2000), Global liquidity in the 1990s: geographicalallocation and long-run determinants, mimeo, Bank of Italy.

Grilli, V. (1989), Europe 1992: issues and prospects for the financial markets, (FRQRPLF3ROLF\, October.

Gros, Daniel and Niels Thygesen (1998), European Monetary Integration, Longman,London.

Huizinga, Harry and Søren Bo Nielsen (2000a), The taxation of interest in Europe: aminimum withholding tax, in Sijbren Cnossen (ed.): Taxing capital income in theEuropean Union, Oxford University Press.

Huizinga, Harry and Søren Bo Nielsen (2000b), Withholding taxes or informationexchange: the taxation of international interest flows, mimeo, European Commission.

International Bureau for Fiscal Documentation, (XURSHDQ�7D[�+DQGERRN, Amsterdam.

21

International Monetary Fund, ,QWHUQDWLRQDO�ILQDQFLDO�VWDWLVWLFV, Washington D.C.

Janeba, Eckhard and Wolfgang Peters (1999), The evasion, tax competition and the gainsfrom non-discrimination: the case of interest taxation in Europe, (FRQRPLF�-RXUQDO 109,93-101.

La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, Robert W. Vishny (1997),Legal determinants of external finance, -RXUQDO�RI�)LQDQFH 52, 1131-1150.

OECD (2000), ,PSURYLQJ�DFFHVV�WR�EDQN�LQIRUPDWLRQ�IRU�WD[�SXUSRVHV, Paris.

Phensel (2000), http://garnet.acns.fsu.edu/~phensel/intldata.html#geog.

Portes, Richard, and Hélène Rey (1999), The determinants of cross-border equity flows,CEPR Discussion Paper 2225.

PriceWaterhouseCoopers, ,QWHUQDWLRQDO�FRUSRUDWH�LQFRPH�WD[HV��D�ZRUOGZLGH�VXPPDU\.

WorldAtlas.com (2001), http://www.worldatlas.com.

Zee, Howell H. (1998), Taxation of financial capital in a globalized environment: the roleof withholding taxes, 1DWLRQDO�7D[�-RXUQDO 51, 587-99.

22

$SSHQGL[�$��9DULDEOH�GHILQLWLRQV�DQG�VRXUFHV�

([WHUQDO�EDQN�OLDELOLW\�DQG�GHSRVLW�GDWD

Bilateral data on total and non-bank external liabilities and deposits are for all currencies.In the regressions, non-bank external liabilities and non-bank external deposits are in realecus or euros and in logs. Total deposits in the banking system in Table 2 is the sum ofdemand and other deposits (lines 24 and 25 of the ,QWHUQDWLRQDO�)LQDQFLDO�6WDWLVWLFV of theIMF).

7D[DWLRQ�DQG�EDQN�LQIRUPDWLRQ�YDULDEOHV

,QFRPH�WD[�[�GHSRVLW�UDWH = income tax rate (between 0 and 100) times the deposit interestrate (between 0 and 1) in the bank customer country

:HDOWK� WD[ = wealth tax is the wealth tax applicable to financial assets (between 0 and100)

:LWKKROGLQJ� WD[ [� GHSRVLW� UDWH� = non-resident interest withholding tax on interest(between 0 and 100) times the deposit interest rate (between 0 and 1) in the bankcountry

'RPHVWLF� LQIRUPDWLRQ = dummy signaling automatic reporting by banks of interestpayments to domestic residents

,QWHUQDWLRQDO� LQIRUPDWLRQ = dummy signaling the international exchange of informationon bank interest payments

The taxation variables are from ,QWHUQDWLRQDO� WD[� VXPPDULHV (Coopers & Lybrand),,QWHUQDWLRQDO�FRUSRUDWH�LQFRPH�WD[HV��D�ZRUOGZLGH�VXPPDU\�(PriceWaterhouseCoopers),and the (XURSHDQ� WD[� KDQGERRN (International Bureau for Fiscal Documentation).Information on whether there recently has been domestic interest reporting by banks andany automatic exchange of information on international bank interest payments is takenfrom OECD (2000). Information on when automatic domestic reporting by banks started(in Table 6) and to what countries and since when bank interest information is providedautomatically (in Tables 7) has been obtained from national authorities. The depositinterest rate is line 60l of the ,QWHUQDWLRQDO�ILQDQFLDO�VWDWLVWLFV�of the IMF.

2WKHU�YDULDEOHV

5HDO�*'3 = log of GDP in real ecus or euros%DQN�LQWHUHVW�VSUHDG = log of ratio of bank lending and deposit interest rates5XOH�RI�ODZ�= assessment of the law and order tradition in a country. Scale from 0 to 10)UHQFK�ODZ� dummy identifying French legal origin*HUPDQ�ODZ = dummy identifying German legal origin6FDQGLQDYLDQ�ODZ� �dummy identifying Scandinavian legal origin%DQN�FRXQWU\�H[SRUWV = log of exports from bank country to customer country in real ecus

or euros&XVWRPHU��FRXQWU\�H[SRUWV = log of exports from customer country to bank country in real

ecus or euros

23

'LVWDQFH = distance in kilometers from capital to capital&RQWLJXLW\ = dummy identifying a common border&RPPRQ�ODQJXDJH = dummy identifying common language

Data on GDPs and trade are from Eurostat and the IMF. The lending interest rate is line60p of the ,QWHUQDWLRQDO� ILQDQFLDO� VWDWLVWLFV of the IMF. Information on rule of law andlegal origin is from La Porta et al. (1997). Data on distance, contiguity, and commonlanguage are from WorldAtlas.com (2000) and Phensel (2000).

24

Table 1. External liabilities and deposits of banks in the BIS-area in 1999

External liabilities External deposits¼�EQ % non-bank ¼�EQ % non-bank

Australia 146 8 47 26Austria 80 12 65 15Bahamas 225 33 224 33Bahrein 82 31 82 31Belgium 272 31 261 28Canada 100 32 95 34Cayman Islands 604 42 597 43Denmark 56 15 46 18Finland 22 20 12 35France 611 9 472 12Germany 819 32 719 37Hong Kong 349 23 348 23Ireland 129 19 126 19Italy 233 7 232 7Japan 509 6 502 6Luxembourg 371 37 319 37Netherlands 288 18 240 22Norway 25 9 15 12Portugal 65 17 55 13Singapore 393 29 361 32Spain 184 39 177 40Sweden 72 13 53 10Switzerland 560 48 560 48United Kingdom 1,778 21 1,626 21United States 1,035 9 1,035 13Other 24 30 24 30

Total 9,031 24 8,292 25

Source: BIS (2000), Tables 2A, 2B,3A, and 3B and own calculations

25

Table 2. Summary statistics on external deposits in 1998

Country Exports ofdeposits(¼�EQ�

Imports ofdeposits(¼�EQ�

Totaldeposits in

bankingsystem (¼

bn)

Depositsowned byresidentsheld at

home orabroad(¼�EQ�

Share ofdeposits

owned byresidents

held abroad(%)

Expansionrate of

deposits inbanking

system due tonet importsof deposits

(%)

Exports ofnon-bankdeposits(¼�EQ�

Imports ofnon-bankdeposits(¼�EQ�

Australia 16 18 203 202 8 1 6 3Austria 37 43 6 6

Bahamas 124 147Belgium 154 185 13 30Canada 45 75 317 287 16 11 14 15

Denmark 33 36 86 83 40 3 3 5Finland 17 9 53 61 28 -14 1 1France 288 326 41 34

Germany 337 494 1,267 1,110 30 14 87 97Ireland 58 91 19 19Italy 155 173 457 438 35 4 41 17Japan 348 364 36 14

Netherlands 254 202Norway 6 10 72 69 9 5 2 1Portugal 29 30 87 85 34 2 5 5

Spain 112 108 317 321 35 -1 46 18Sweden 31 57 4 12

Switzerland 459 261 325 523 88 -38 42 93United 1,035 1,024 86 237

26

KingdomUnited States 656 541 2,291 2,406 27 -5 228 31

For data sources see Appendix A. Note that exports and imports are calculated using only data from those countries for which importsare available.

27

Table 3. Summary statistics on external liabilities in 1998

Country Exports ofliabilities

(¼�EQ�

Imports ofliabilities

(¼�EQ�

Exports ofnon-bankliabilities

(¼�EQ�

Imports ofnon-bankliabilities

(¼�EQ�Australia 22 74 7 3Austria 38 45 6 6

Bahamas 129 157 10 59Bahrain 25 35 2 3Belgium 157 200 13 41Canada 48 81 15 18

Denmark 38 37 3 5Finland 17 9 1 1France 313 348 41 35

Germany 352 512 89 97Hong Kong 258 294 23 14

Ireland 59 92 19 19Italy 158 177 41 17Japan 653 545 40 15

Netherlands 268 209Norway 7 10 2 1Portugal 29 40 5 8

Singapore 216 251Spain 113 109 47 18

Sweden 32 58 5 12Switzerland 463 277 42 98

UnitedKingdom

1,129 1,098 97 243

United States 709 572 234 34

For data sources see Appendix A. Note that exports and imports are calculated usingonly data from those countries for which imports are available.

28

Table 4. Wealth tax rate and interest income tax rate for bank deposits of residents in1999

��&RXQWU\ ,QFRPH�WD[� :HDOWK�WD[

Australia 47 0Austria 25 0Bahamas 0 0Bahrain 0 0Belgium 15 0Canada9 48.75 0Cayman Islands 0 0Denmark10 61.7 0Finland11 28 0.9France 12 25 1.8Germany13 56.975 0Hong Kong 0 0Ireland 24 0Italy 27 0Japan14 20 0Luxembourg 47.15 0.5Netherlands 60 0.7Netherlands Antilles 60 0Norway15 28 1.1Portugal 20 0Singapore 28 0Spain16 48 2.5Sweden 30 1.5Switzerland17 41.4 0.713United Kingdom 40 0United States18 39.6 0

For data sources see Appendix A

8 Final withholding tax or top marginal tax rate.9 Ontario.10 Copenhagen. Sum of basic rate, surcharges, and local and church taxes.11 Helsinki.12 Including social surcharge and generalized social tax.13 Including solidarity surcharge.14 Tokyo. Including local taxes.15 Sum of 0.4% national tax plus 0.7% local tax.16 Including regional tax.17 Bern, including cantonal and municipal wealth tax.18 Federal tax only.

30

Table 5. Withholding tax rates on interest from deposits received by non-residents in 1999

,QYHVWRU&RXQWU\

?

6RXUFH&RXQWU\

$XVWUDOLD

$XVWULD

%DKDPDV

%DKUDLQ

%HOJLXP

&DQDGD

&D\PDQ�,VO�

'HQPDUN

)LQODQG

)UDQFH

*HUPDQ\

*UHHFH

+RQJ�.RQJ

,UHODQG

,WDO\

-DSDQ

/X[HPERXUJ

1HWKHUODQGV

1HWKHUO��$QW�

1RUZD\

3RUWXJDO

6SDLQ

6ZHGHQ

6ZLW]HUODQG

8��.LQJGRP

8QLWHG�6WDWHV

$XVWUDOLD x 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10

$XVWULD 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

%DKDPDV 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

%DKUDLQ 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

%HOJLXP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

&DQDGD 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

&D\PDQ�,VO� 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

'HQPDUN 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

)LQODQG 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

)UDQFH 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

*HUPDQ\ 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

*UHHFH 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0+RQJ�.RQJ 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0

,UHODQG 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0

,WDO\ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0

-DSDQ 10 10 15 15 10 10 15 10 10 10 10 15 15 10 10 x 10 10 15 10 15 10 10 10 10 10

/X[HPERXUJ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0

1HWKHUODQGV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0

1HWKHUO��$QW� 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0

1RUZD\ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0

3RUWXJDO 20 10 20 20 15 20 20 20 15 12 15 20 20 15 15 20 20 20 20 15 x 15 20 10 10 10

6SDLQ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0

6ZHGHQ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0

6ZLW]HUODQG 10 5 35 35 10 10 35 0 0 0 0 10 35 0 12,5 10 10 5 35 0 10 10 5 x 0 58��.LQJGRP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x 0

8QLWHG�6WDWHV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 x

For data sources see Appendix A. Where different rates apply to foreign currency deposits, the lowest rate is given.

31

Table 6. Automatic reporting by banks on interest payments to domestic residents

&RXQWU\ <HV�RU�QR ,I�\HV��VLQFH

Australia Yes 88Austria NoBelgium NoCanada YesDenmark Yes 77Finland Yes Over 20 yearsFrance Yes 84Germany NoGreece NoIreland Yes 92Italy NoJapan YesLuxembourg NoNetherlands Yes 87Norway Yes 86Portugal NoSpain Yes 85Sweden Yes 86Switzerland NoUnited Kingdom Yes 52United States Yes


32

Table 7. International automatic exchange of information on bank interest payments

)URP 7R 6LQFHAustralia Treaty partners About 95Austria NoneBelgium NoneCanada U.S at least

Denmark19 Differing countries 1993Finland20 Treaty partners (except Russia) Over 20 yearsFrance21 94Germany NoneGreece NoneIreland NoneItaly NoneJapan Some countries

Luxembourg NoneNetherlands None

Norway Treaty partners More than 10years

Portugal NoneSpain None

Sweden Canada, Denmark, Finland, Iceland, Norway, USAustralia, Estonia, France, Italy, Japan, Lithuania,

Spain, UK

9197

Switzerland NoneUnited

KingdomSome countries

19 In 1998 and 1999, Denmark provided info to Australia, Canada, Czech Republic, Faeroe Islands, Finland,France, Greenland, Hungary, Japan, Korea, New Zealand, Norway, Spain, Sweden, UK, US.

20 Main recipients have been Belgium, Denmark, Finland, France, Germany, Iceland, Japan, New Zealand,Poland, Sweden, UK, US.

21 In 1999, France provided information to Australia, Austria, Belgium, Canada, Denmark, Finland,Germany, Iceland, Italy, Japan, Korea, Netherlands, New Caledonia, New Zealand, Norway, Portugal,Spain, Sweden, UK, US.

33

United States Canada 1997


34

Table 8. International automatic exchange of information on bank interest in 1999

5HFHLYLQJ&RXQWU\

?

3URYLGLQJ&RXQWU\

$XVWUDOLD

$XVWULD

%DK

DPDV

%DK

UDLQ

%HOJLXP

&DQ

DGD

&D\PDQ

�,VO�

'HQ

PDUN

)LQODQG

)UDQFH

*HUPDQ

\

*UHHFH

+RQJ�.RQJ

,UHODQ

G

,WDO\

-DSDQ

/X[HPERXUJ

1HWKHUODQGV

1HWKHUO��$QW�

1RUZ

D\

3RUWXJDO

6SDLQ

6ZHG

HQ

6ZLW]HUODQ

G

8��.

LQJGRP

8QLWHG

�6WDWHV

$XVWUDOLD X 1 0 0 1 1 0 1 1 1 1 0 0 1 1 1 0 1 0 1 0 1 1 1 1 1$XVWULD 0 X 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0%HOJLXP 0 0 0 0 X 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0&DQDGD X 1'HQPDUN 1 0 0 0 0 1 0 X 1 1 0 0 0 0 0 1 0 0 0 1 0 1 1 0 1 1)LQODQG 1 1 0 0 1 1 0 1 X 1 1 1 0 1 1 1 1 1 0 1 1 1 1 1 1 1)UDQFH 1 1 0 0 1 1 0 1 1 X 1 0 0 0 1 1 0 1 0 1 1 1 1 0 1 1*HUPDQ\ 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0*UHHFH 0 0 0 0 0 0 0 0 0 0 0 x 0 0 0 0 0 0 0 0 0 0 0 0 0 0,UHODQG 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 0 0 0 0 0,WDO\ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 0 0 0 0

/X[HPERXUJ

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 0 0

1HWKHUODQGV

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 0

1RUZD\ 0 0 1 0 1 1 1 1 0 1 0 X 1 1 13RUWXJDO 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 06SDLQ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 06ZHGHQ 1 0 0 0 0 1 0 1 1 1 0 0 0 0 1 1 0 0 0 1 0 1 X 0 1 1

35

5HFHLYLQ

J&RXQWU\

?

3URYLG

LQJ

&RXQWU\

$XVWUDOLD

$XVWULD

%DKDPDV

%DKUDLQ

%HOJLXP

&DQDGD

&D\PDQ�,VO�

'HQPDUN

)LQODQG

)UDQFH

*HUPDQ\

*UHHFH

+RQJ�.RQJ

,UHODQG

,WDO\

-DSDQ

/X[HPERXUJ

1HWKHUODQGV

1HWKHUO��$QW�

1RUZD\

3RUWXJDO

6SDLQ

6ZHGHQ

6ZLW]HUODQG

8��.LQJGRP

8QLWHG�6WDWHV

6ZLW]HUODQG

00

00

00

00

00

00

00

00

00

00

00

0X

00

8QLWHG

6WDWHV

00

00

01

00

00

00

00

00

00

00

00

00

0X


36

Table 9. Determinants of external non-bank liabilities and deposits

(1)

Liabilities

(2) (3) (4)

Deposits

(5) (6)

%DQN�FRXQWU\

Real GDP .082(.056)

.701(.448)

.858*(.431)

-.120(.098)

2.728(1.984)

2.696(1.951)

Bank interest spread -.386**(.063)

.065(.068)

.085(.065)

-.529**(.100)

-.260(.250)

-.265(.240)

Rule of law .666**(.067)

.015(.104)

French law -.252*(.116)

-.775**(-160)

German law -.148(.128)

.198(.186)

Scandinavian law -2.719**(.138)

-2.296**(.193)

&XVWRPHU�FRXQWU\

Real GDP .184**(.058)

.082(.047)

.900(.492)

.082(.104)

-.005(.083)

.072(1.863)

Bank interest spread -.094(.070)

-.037(.061)

.250**(.073)

.038(.152)

.041(123)

.228(.273)

Rule of law .138**(.045)

.070(.039)

.080(.105)

.080(.081)

French law -.989**(.097)

-.916**(.082)

-1.224**(.205)

-1.206**(.161)


-.167(.121)

-.564(.324)

-.619**(.265)


-2.087**(.092)

-2.454**(.209)

-2.401**(.163)

Income tax x and depositrate

.056**(.017)

.043**(.013)

.024(.13)

.019(.098)

-.009(.076)

-.074(.141)

Wealth tax .064(.047)

.190**(.037)

.064(.068)

.209*(.105)

.344*(.087)

.163(.324)

Domestic information .368**(.091)

.255**(.078)

.247*(.124)

.196(.215)

-.017(.185)

5HODWLRQVKLS

Bank country exports .349**(.057)

.463**(.053)

.254**(.056)

.539**(.101)

.517**(.092)

.443**(.100)

Customer countryexports

.239**(.058)

.257**(.046)

.389**(.047)

.246*(.106)

.358**(.086)

.438**(.084)

Distance -.837**(.60)

-.459**(.050)

-.231**(.079)

-.741**(0.103)

-.384**(0.086)

-.141(0.130)

Contiguity .005 .083 .397** -.124 .022 .244

37

(.094) (.077) (.085) (.163) (.139) (.152)Common language .436**

(.106).484**(.077)

.524**(.076)

.245(.171)

.147(.121)

.074(.122)

Withholding tax xdeposit rate

-.780**(.122)

-.024(.114)

.023(.106)

-1.413(.250)

-.516)(.378)

-.489(.368)

Adj. R² .72 .82 .84 .70 .82 .83No. of obs 2375 2375 2375 757 757 757Data on liabilities is for 1983-1999, while data on deposits is for 1996-1999. Allregressions include unreported time dummies. Columns (2), (3), (5) and (6)include bank country dummies, while columns (3) and (6) in addition containcustomer country dummies. Detailed variable definitions and data sources aregiven in Appendix A. Heteroskedasticity consistent errors are given inparentheses. * and ** indicate significance levels of 5 and 1 percent, respectively.

38

Table 10. Determinants of non-bank liabilities and deposits 1999

(1)

Liabilities

(2) (3) (4)

Deposits

(5) (6)

%DQN�FRXQWU\

Real GDP .659**(.154)

.672**(.155)

Bank interest spread .070(.343)

-.018(.344)

Rule of law .357*(.181)

.266(.186)

French law -.376(.819)

-.626(-.826)


-.097(.851)

Scandinavian law -1.524*(.762)

-1.640*(.767)

&XVWRPHU�FRXQWU\

Real GDP .472**(.174)

.266(.158)

.494**(.175)

.298*(.160)

Bank interest spread .656(.644)

1.666**(.622)

.629(.641)

1.595*(.620)

Rule of law .368(.296)

.791**(.246)

.347(.292)

.754(.767)

French law -.494(.771)

.434(.739)

-.623(.764)

.259(.736)


-.494(.516)

-.971(.603)

-.671(.518)


-1.858**(.499)

-2.184**(.542)

-1.928**(.500)

Income tax x and depositrate

.567(.620)

1.461**(.614)

.517(.617)

1.372*(.612)

Wealth tax .508(.371)

1.087**(.347)

.533*(.370)

1.091**(.347)

Domestic information -.164(.643)

-1.080(.630)

-.245(.644)

-1.124(.634)

5HODWLRQVKLSDistance -

1.189**(.214)

-.892**(.226)

-1.454**(.272)

-1.169**(.215)

-.883**(.227)

-1.457*

*(.272)

Contiguity .549(.335)

.881**(.285)

.395(.308)

.540(.332)

.871**(.286)

.383(.307)

39

Common language .061(.339)

-.326(.277)

-.400(.253)

.077*(.337)

-.313(.272)

-.391(.247)

Withholding tax anddeposit rate

-.489(.286)

3.720(3.277)

2.399(3.031)

-1.039(1.243)

3.408(3.370)

2.068(3.165)

International information -.499(1.238)

.014(.363)

0.051(.350)

-.422(.285)

-.007( .357)

0 .022(.344)

Adj. R² .59 .71 .74 .59 .71 .73No. of obs 203 203 203 203 203 203All regressions include unreported time dummies. Columns (2), (3), (5) and (6)include bank country dummies, while columns (3) and (6) in addition containcustomer country dummies. Detailed variable definitions and data sources aregiven in Appendix A.Heteroskedasticity consistent errors are given in parentheses.* and ** indicate significance levels of 5 and 1 percent, respectively.

40

Figure 1. Average interest income tax on residents

20

25

30

35

40

45

50

55

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

�

Note. For countries listed in Table 5. For data sources see Appendix A

Figure 2. Average wealth tax on financial wealth

0,20

0,25

0,30

0,35

0,40

0,45

0,50

0,55

0,60

0,65

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

�


41

Figure 3. Average withholding tax on interest from bank deposits to non-residents

1,00

1,50

2,00

2,50

3,00

3,50

4,00

4,50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

�


42

Economic Papers*

The following papers have been issued. Copies may be obtained by applying to the address:European Commission, Directorate-General for Economic and Financial Affairs200, rue de la Loi (BU-1, -1/10)1049 Brussels, Belgium

No. 1 EEC-DG II inflationary expectations. Survey based inflationary expectations for theEEC countries, by F. Papadia and V. Basano (May 1981).

No. 3 A review of the informal Economy in the European Community, By Adrian Smith(July 1981).

No. 4 Problems of interdependence in a multipolar world, by Tommaso Padoa-Schioppa(August 1981).

No. 5 European Dimensions in the Adjustment Problems, by Michael Emerson (August1981).

No. 6 The bilateral trade linkages of the Eurolink Model : An analysis of foreign trade andcompetitiveness, by P. Ranuzzi (January 1982).

No. 7 United Kingdom, Medium term economic trends and problems, by D. Adams, S.Gillespie, M. Green and H. Wortmann (February 1982).

No. 8 Où en est la théorie macroéconomique, par E. Malinvaud (juin 1982).

No. 9 Marginal Employment Subsidies : An Effective Policy to Generate Employment, byCarl Chiarella and Alfred Steinherr (November 1982).

No. 10 The Great Depression: A Repeat in the l980s ?, by Alfred Steinherr (November 1982).

No. 11 Evolution et problèmes structurels de l’économie néerlandaise, par D.C. Breedveld, C.Depoortere, A. Finetti, Dr. J.M.G. Pieters et C. Vanbelle (mars 1983).

No. 12 Macroeconomic prospects and policies for the European Community, by GiorgioBasevi, Olivier Blanchard, Willem Buiter, Rudiger Dornbusch, and Richard Layard(April 1983).

No. 13 The supply of output equations in the EC-countries and the use of the survey–basedinflationary expectations, by Paul De Grauwe and Mustapha Nabli (May 1983).

No. 14 Structural trends of financial systems and capital accumulation : France, Germany,Italy, by G. Nardozzi (May 1983).

No. 15 Monetary assets and inflation induced distorsions of the national accounts - conceptualissues and correction of sectoral income flows in 5 EEC countries, by Alex Cukiermanand Jorgen Mortensen (May 1983).

No. 16 Federal Republic of Germany. Medium-term economic trends and problems, by F.Allgayer, S. Gillespie, M. Green and H. Wortmann (June 1983).

No. 17 The employment miracle in the US and stagnation employment in the EC, by M.Wegner (July 1983).

* Issues 1 to 115 are out-of-print

No. 18 Productive Performance in West German Manufacturing Industry 1970-l980; AFarrell Frontier Characterisation, by D. Todd (August 1983).

43

No. 19 Central-Bank Policy and the Financing of Government Budget Deficits : A Cross-Country Comparison, by G. Demopoulos, G. Katsimbris and S. Miller (September1983).

No. 20 Monetary assets and inflation induced distortions of the national accounts. The case ofBelgium, by Ken Lennan (October 1983).

No. 21 Actifs financiers et distorsions des flux sectoriels dues à l’inflation: le cas de laFrance, par J.–P Baché (octobre 1983).

No. 22 Approche pragmatique pour une politique de plein emploi : les subventions à lacréation d’emplois, par A. Steinherr et B. Van Haeperen (octobre 1983).

No. 23 Income Distribution and Employment in the European Communities 1960-1982, by A.Steinherr (December 1983).

No. 24 U.S. Deficits, the dollar and Europe, by O. Blanchard and R. Dornbusch (December1983).

No. 25 Monetary Assets and inflation induced distortions of the national accounts. The caseof the Federal Republic of Germany, by H. Wittelsberger (January 1984).

No. 26 Actifs financiers et distorsions des flux sectoriels dues à l’inflation : le cas de l’Italie,par A. Reati (janvier 1984).

No. 27 Evolution et problèmes structurels de l’économie italienne, par Q. Ciardelli, F.Colasanti et X. Lannes (janvier 1984).

No. 28 International Co-operation in Macro-economic Policies, by J.E. Meade (February1984).

No. 29 The Growth of Public Expenditure in the EEC Countries 1960-1981 : SomeReflections, by Douglas Todd (December 1983).

No. 30 The integration of EEC qualitative consumer survey results in econometric modelling: an application to the consumption function, by Peter Praet (February 1984).

No. 31 Report of the CEPS Macroeconomic Policy Group. EUROPE : The case forunsustainable growth, by R. Layard, G. Basevi, O. Blanchard, W. Buiter and R.Dornbusch (April 1984).

No. 32 Total Factor Productivity Growth and the Productivity Slowdown in the West GermanIndustrial Sector, 1970-1981, by Douglas Todd (April 1984).

No. 33 An analytical Formulation and Evaluation of the Existing Structure of Legal ReserveRequirements of the Greek Economy : An Uncommon Case, by G. Demopoulos(June 1984).

No. 34 Factor Productivity Growth in Four EEC Countries, 1960-1981, by Douglas Todd(October 1984).

No. 35 Rate of profit, business cycles and capital accumulalion in U.K. industry, 1959-1981,by Angelo Reati (November 1984).

No. 36 Report of the CEPS Macroeconomic Policy Group. Employment and Growth inEurope : A Two-Handed Approach by P. Blanchard, R. Dornbush, J. Drèze, H.Giersch, R. Layard and M. Monti (June 1985).

No. 37 Schemas for the construction of an ”auxiliary econometric model” for the socialsecurity system, by A. Coppini and G. Laina (June l985).

No. 38 Seasonal and Cyclical Variations in Relationship among Expectations, Plans andRealizations in Business Test Surveys, by H. König and M. Nerlove (July 1985).

44

No. 39 Analysis of the stabilisation mechanisms of macroeconomic models : a comparison ofthe Eurolink models by A. Bucher and V. Rossi (July 1985).

No. 40 Rate of profit, business cycles and capital accumulation in West German industry,1960-1981, by A. Reati (July 1985).

No. 41 Inflation induced redistributions via monetary assets in five European countries :1974-1982, by A. Cukierman, K. Lennan and F. Papadia (September 1985).

No. 42 Work Sharing: Why ? How ? How not ..., by Jacques H. Drèze (December 1985).

No. 43 Toward Understanding Major Fluctuations of the Dollar by P. Armington (January1986).

No. 44 Predictive value of firms’ manpower expectations and policy implications, by G. Nerb(March 1986).

No. 45 Le taux de profit et ses composantes dans l’industrie française de 1959 à 1981, parAngelo Reati (mars 1986).

No. 46 Forecasting aggregate demand components with opinions surveys in the four mainEC-Countries - Experience with the BUSY model, by M. Biart and P. Praet (May1986).

No. 47 Report of CEPS Macroeconomic Policy Group : Reducing Unemployment in Europe :The Role of Capital Formation, by F. Modigliani, M. Monti, J. Drèze, H. Giersch andR. Layard (July 1986).

No. 48 Evolution et problèmes structurels de l’économie française, par X. Lannes, B. Philippeet P. Lenain (août 1986).

No. 49 Long run implications of the increase in taxation and public debt for employment andeconomic growth in Europe, by G. Tullio (August 1986).

No. 50 Consumers Expectations and Aggregate Personal Savings, by Daniel Weiserbs andPeter Simmons (November 1986).

No. 51 Do after tax interest affect private consumption and savings ? Empirical evidence for 8industrial countries : 1970-1983, by G. Tullio and Fr. Contesso (December 1986).

No. 52 Validity and limits of applied exchange rate models : a brief survey of some recentcontributions, by G. Tullio (December 1986).

No. 53 Monetary and Exchange Rate Policies for International Financial Stability : aProposal, by Ronald I. McKinnon (November 1986).

No. 54 Internal and External Liberalisation for Faster Growth, by Herbert Giersch (February1987).

No. 55 Regulation or Deregulation of the Labour Market : Policy Regimes for theRecruitment and Dismissal of Employees in the Industrialised Countries, by MichaelEmerson (June 1987).

No. 56 Causes of the development of the private ECU and the behaviour of its interest rates :October 1982 - September 1985, by G. Tullio and Fr. Contesso (July 1987).

No. 57 Capital/Labour substitution and its impact on employment, by Fabienne Ilzkovitz(September 1987).

No. 58 The Determinants of the German Official Discount Rate and of Liquidity Ratiosduring the classical goldstandard: 1876-1913, by Andrea Sommariva and GiuseppeTullio (September 1987).

45

No. 59 Profitability, real interest rates and fiscal crowding out in the OECD area 1960-1985(An examination of the crowding out hypothesis within a portfolio model), by JorgenMortensen (October 1987).

No. 60 The two-handed growth strategy for Europe : Autonomy through flexible cooperation,by J. Drèze, Ch. Wyplosz, Ch. Bean, Fr. Giavazzi and H. Giersch (October 1987).

No. 61 Collusive Behaviour, R & D, and European Policy, by Alexis Jacquemin (Novemher1987).

No. 62 Inflation adjusted government budget deficits and their impact on the business cycle :empirical evidence for 8 industrial countries, by G. Tullio (November 1987).

No. 63 Monetary Policy Coordination Within the EMS: Is there a Rule ?, by M. Russo and G.Tullio (April 1988).

No. 64 Le Découplage de la Finance et de l’Economie - Contribution à l’Evaluation desEnjeux Européens dans la Révolution du Système Financier International par J.-Y.Haberer (mai 1988).

No. 65 The completion of the internal market : results of macroeconomic model simulations,by M. Catinat, E. Donni and A. Italianer (September 1988).

No. 66 Europe after the crash : economic policy in an era of adjustment, by Charles Bean(September 1988).

No. 67 A Survey of the Economies of Scale, by Cliff Pratten (October 1988).

No. 68 Economies of Scale and Intra-Community trade, by Joachim Schwalbach (October1988).

No. 69 Economies of Scale and the Integration of the European Economy : the Case of Italy,by Rodolfo Helg and Pippo Ranci (October 1988).

No 70 The Costs of Non-Europe - An assessment based on a formal Model of ImperfectCompetition and Economies of Scale, by A. Smith and A. Venables (October 1988).

No. 71 Competition and Innovation, by P.A. Geroski (October I 988).

No. 72 Commerce Intra-Branche - Performances des firmes et analyse des échangescommerciaux dans 1a Communauté européenne par le Centre d’Etudes Prospectives etd’Informations Internationales de Paris (octobre 1988).

No. 73 Partial Equilibrium Calculations of the Impact of Internal Market Barriers in theEuropean Community, by Richard Cawley and Michael Davenport (October 1988).

No. 74 The exchange-rate question in Europe, by Francesco Giavazzi (January 1989).

No. 75 The QUEST model (Version 1988), by Peter Bekx, Anne Bucher, Alexander Italianer,Matthias Mors (March 1989).

No. 76 Europe’s Prospects for the 1990s, by Herbert Giersch (May 1989).

No. 77 1992, Hype or Hope : A review, by Alexander Italianer (February 1990).

No. 78 European labour markets : a long run view (CEPS Macroeconomic Policy Group 1989Annual Report), by J.-P. Danthine, Ch. Bean, P. Bernholz and E. Malinvaud (February1990).

No. 79 Country Studies - The United Kingdom, by Tassos Belessiotis and Ralph Wilkinson(July 1990).

No. 80 See ” Länderstudien” No. 1

46

No. 81 Country Studies - The Netherlands, by Filip Keereman, Françoise Moreau and CyrielVanbelle (July 1990).

No. 82 Country Studies - Belgium, by Johan Baras, Filip Keereman and Françoise Moreau(July 1990).

No. 83 Completion of the internal market : An application of Public Choice Theory, byManfred Teutemann (August 1990).

No. 84 Monetary and Fiscal Rules for Public Debt Sustainability, by Marco Buti (September1990).

No. 85 Are we at the beginning of a new long term expansion induced, by technologicalchange ?, by Angelo Reati (August 1991).

No. 86 Labour Mobility, Fiscal Solidarity and the Exchange Rate Regime : a Parable ofEuropean Union and Cohesion, by Jorge Braga de Macedo (October 1991).

No. 87 The Economics of Policies to Stabilize or Reduce Greenhouse Gas Emissions : theCase of CO2, by Mathias Mors (October 1991).

No. 88 The Adequacy and Allocation of World Savings, by Javier Santillán (December1991).

No. 89 Microeconomics of Saving, by Barbara Kauffmann (December 1991).

No. 90 Exchange Rate Policy for Eastern Europe and a Peg to the ECU, by MichaelDavenport (March 1992).

No. 91 The German Economy after Unification : Domestic and European Aspects, by JürgenKröger and Manfred Teutemann (April 1992).

No. 92 Lessons from Stabilisation Programmes of Central and Eastern European Countries,1989-91, by Domenico Mario Nuti (May 1992).

No. 93 Post-Soviet Issues : Stabilisation, Trade and Money, by D. Mario Nuti and JeanPisani–Ferry (May 1992).

No. 94 Regional Integration in Europe by André Sapir (September 1992).

No. 95 Hungary : Towards a Market Economy (October 1992).

No. 96 Budgeting Procedures and Fiscal Performance in the European Communities, byJürgen von Hagen (October 1992).

No. 97 L’ECU en poche ? Quelques réflexions sur la méthode et le coût du remplacement desmonnaies manuelles nationales par des pièces et des billets en ECU, par EphraïmMarquer (octobre 1992).

No. 98 The Role of the Banking Sector in the Process of Privatisation, by Domenico MarioNuti (November 1992).

No. 99 Towards budget discipline : an economic assessment of the possibilities for reducingnational deficits in the run-up to EMU, by Dr. J. de Haan, Dr. C.G.M. Sterks and Prof.Dr. C.A. de Kam (December 1992).

No. 100 EC Enlargement and the EFTA Countries, by Christopher Sardelis (March 1993).

No. 101 Agriculture in the Uruguay Round : ambitions and realities, by H. Guyomard, L.-P.Mahé, K. Munk and T. Roe (March 1993).

No. 102 Targeting a European Monetary Aggregate, Review and Current Issues, byChristopher Sardelis (July 1993).

47

No. 103 What Have We Learned About the Economic Effects of EC Integration ? - A Surveyof the Literature, by Claudia Ohly (September 1993).

No. 104 Measuring the Term Structure of ECU Interest Rates, by Johan Verhaeven and WernerRöger (October 1993).

No. 105 Budget Deficit and Interest Rates : Is there a Link ? International evidence, by JoséNunes–Correia and Loukas Stemitsiotis (November 1993).

No. 106 The Implications for Firms and Industry of the Adoption of the ECU as the SingleCurrency in the EC, by M. Burridge and D.G. Mayes (January 1994).

No. 107 What does an economist need to know about the environment ? Approaches toaccounting for the environment in statistical informations systems, by Jan Scherp(May 1994).

No. 108 The European Monetary System during the phase of transition to European MonetaryUnion, by Dipl.–Vw. Robert Vehrkamp (July 1994).

No. 109 Radical innovations and long waves into Pasinetti’s model of structural change :output and employment, by Angelo Reati (March 1995).

No. 110 Pension Liabilities - Their Use and Misuse in the Assessment of Fiscal Policies, byDaniele Franco (May 1995).

No. 111 The Introduction of Decimal Currency in the UK in 1971. Comparisons with theIntroduction of a Single European Currency, by N.E.A. Moore (June 1995).

No. 112 Cheque payments in Ecu - A Study of Cross-Border Payments by Cheques in EcuAcross the European Union, by BDO Stoy Hayward Management Consultants (July1995).

No. 113 Banking in Ecu - A Survey of Banking Facilities across the European Union in theECU, Deutschmark and Dollar and of Small Firms’ Experiences and Opinions of theEcu, by BDO Stoy Hayward Management Consultants (July 1995).

No. 114 Fiscal Revenues and Expenditure in the Community. Granger-Causality Among FiscalVariables in Thirteen Member States and Implications for Fiscal Adjustment, byTassos Belessiotis (July 1995).

No. 115 Potentialities and Opportunities of the Euro as an International Currency, by AgnèsBénassy-Quéré (July 1996).

No. 116 Consumer confidence and consumer spending in France, by Tassos Belessiotis(September 1996).

No. 117 The taxation of Funded Pension Schemes and Budgetary Policy, by Daniele Franco(September 1996).

No. 118 The Wage Formation Process and Labour Market Flexibility in the Community, theUS and Japan, by Kieran Mc Morrow (October 1996).

No. 119 The Policy Implications of the Economic Analysis of Vertical Restraints, by PatrickRey and Francisco Caballero-Sanz (November 1996).

No. 120 National and Regional Development in Central and Eastern Europe: Implications forEU Structural Assistance, by Martin Hallet (March 1997).

No. 121 Budgetary Policies during Recessions, - Retrospective Application of the “Stabilityand Growth Pact” to the Post-War Period -, by M. Buti, D. Franco and H. Ongena(May 1997).

48

No. 122 A dynamic analysis of France’s external trade - Determinants of merchandise importsand exports and their role in the trade surplus of the 1990s, by Tassos Belessiotis andGiuseppe Carone (October 1997).

No. 123 QUEST II - A Multi Country Business Cycle and Growth Model, by Werner Roegerand Jan in’t Veld (October 1997).

No. 124 Economic Policy in EMU - Part A : Rules and Adjustment, by Directorate General II,Economic and Financial Affairs (November 1997).

No. 125 Economic Policy in EMU - Part B : Specific Topics, by Directorate General II,Economic and Financial Affairs (November 1997).

No. 126 The Legal Implications of the European Monetary Union under the U.S. and NewYork Law, by Niall Lenihan (January 1998).

No. 127 Exchange Rate Variability and EU Trade, by Khalid Sekkat (February 1998).

No. 128 Regionalism and the WTO: New Rules for the Game?, by Nigel Nagarajan (June1998).

No. 129 MERCOSUR and Trade Diversion: What Do The Import Figures Tell Us?, by NigelNagarajan (July 1998).

No. 130 EUCARS: A partial equilibrium model of EUropean CAR emissions (Version 3.0), byCécile Denis and Gert Jan Koopman (November 1998).

No. 131 Is There a Stable Money Demand Equation at The Community Level? - Evidence,using a cointegration analysis approach, for the Euro-zone countries and for theCommunity as a whole -, by Kieran Mc Morrow (November 1998).

No. 132 Differences in Monetary Policy Transmission? A Case not Closed, by Mads Kielerand Tuomas Saarenheimo (November 1998).

No. 133 Net Replacement Rates of the Unemployed. Comparisons of Various Approaches, byAino Salomäki and Teresa Munzi (February 1999).

No. 134 Some unpleasant arithmetics of regional unemployment in the EU. Are there anylessons for the EMU?, by Lucio R. Pench, Paolo Sestito and Elisabetta Frontini (April1999).

No. 135 Determinants of private consumption, by A. Bayar and K. Mc Morrow (May 1999).

No. 136 The NAIRU Concept - Measurement uncertainties, hysteresis and economic policyrole, by P. McAdam and K. Mc Morrow (September 1999).

No. 137 The track record of the Commission Forecasts, by F. Keereman (October 1999).

No. 138 The economic consequences of ageing populations (A comparison of the EU, US andJapan), by K. Mc Morrow and W. Roeger (November 1999).

No. 139 The millennium round: An economic appraisal, by Nigel Nagarajan (November 1999).

No. 140 Disentangling Trend and Cycle in the EUR-11 Unemployment Series – AnUnobserved Component Modelling Approach, by Fabrice Orlandi and KarlPichelmann (February 2000)

No. 141 Regional Specialisation and Concentration in the EU, by Martin Hallet (February2000)

No. 142 The Location of European Industry, by K.H. Midelfart-Knarvik, H.G. Overman, S.J.Redding and A.J. Venables (April 2000)

No. 143 Report on Financial Stability, by the Economic and Financial Committee (EFC) (May2000)

No. 144 Estimation of Real Equilibrium Exchange Rates, by Jan Hansen and WernerRoeger (September 2000)

No. 145 Time-Varying Nairu/Nawru Estimates for the EU’s Member States, by K.McMorrow and W. Roeger (September 2000)

No. 146 ECFIN’s Effective tax rates. Properties and Comparisons with other tax indicators,by Carlos Martinez-Mongay (October 2000)

No. 147 The Contribution of Information and Communication Technologies to Growth inEurope and the US: A Macroeconomic Analysis, by Werner Roeger (January2001)

No. 148 Budgetary Consolidation in EMU by Jürgen von Hagen (ZEI, University of Bonn,Indiana University, and CEPR), Andrew Hughes Hallett (Strathclyde University,Glasgow, and CEPR), Rolf Strauch (ZEI, University of Bonn) (March 2001)

No. 149 A Case for Partial Funding of Pensions with an Application to the EU CandidateCountries by Heikki Oksanen (March 2001)

No. 150 Potential output: measurement methods, “new” economy influences and scenariosfor 2001-2010- A comparison of the EU-15 and the US, by K. Mc Morrow and W.Roeger (April 2001)

No. 151 Modification of EU leading indicators based on harmonised business andconsumer surveys, by The IFO Institute for Economic Research, introduction byPedro Alonso, Directorate General for Economic and Financial Affairs(May 2001)

No. 152 Are international deposits tax-driven?, by Harry Huizinga and Gaëtan Nicodème(June 2001)

50

Euro Papers

The following papers have been issued. Copies may be obtained by applying to the address:European Commission, Directorate-General for Economic and Financial Affairs200, rue de la Loi (BU-1, -1/10)1049 Brussels, Belgium

No. 1 External aspects of economic and monetary union, by Directorate General II,Economic and Financial Affairs (July 1997).

No. 2 Accounting for the introduction of the euro, by Directorate General XV, InternalMarket and Financial Services (July 1997).

No. 3 The impact of the introduction of the euro on capital markets, by DirectorateGeneral lI, Economic and Financial Affairs (July 1997).

No. 4 Legal framework for the use of the euro, by Directorate General II, Economic andFinancial Affairs(September 1997).

No. 5 Round Table on practical aspects of the changeover to the euro -May 15, 1997 -Summary and conclusions, by Directorate General II, Economic and FinancialAffairs (September 1997).

No. 6 Checklist on the introduction of the euro for enterprises and auditors, byFédération des Experts Comptables Européens (September 1997).

No. 7 The introduction of the euro—Compilation of community legislation and relateddocuments, by Directorate General II, Economic and Financial Affairs (October1997).

No. 8 Practical aspects of the introduction of the euro, by Directorate General II,Economic and Financial Affairs (November 1997).

No. 9 The impact of the changeover to the euro on community policies, institutions andlegislation, by Directorate General II, Economic and Financial Affairs (November1997).

No. 10 Legal framework for the use of the euro - Questions and answers on the euroregulations, by Directorate General II, Economic and Financial Affairs(December 1997).

No. 11 Preparing Financial Information Systems for the euro, by Directorate GeneralXV, Internal Market and Financial Services (December 1997).

No. 12 Preparations for the changeover of public administrations to the euro, byDirectorate General II, Economic and Financial Affairs (December 1997).

No. 13 Report of the Expert Group on Technical and Cost Aspects of Dual Display, byDirectorate General II, Economic and Financial Affairs (December 1997).

No. 14 Report of the Expert Group on banking charges for conversion to the euro, byDirectorate General XV, Internal Market and Financial Services (January 1998).

No. 15 The Legal Implications of the European Monetary Union under the U.S. and NewYork Law, by Niall Lenihan, (Study commissioned by Directorate General II,Economic and Financial Affairs) (January 1998).

No. 16 Commission Communication on the information strategy for the euro, byDirectorate General X, Information, communication, culture, audiovisualcommunication and Directorate General II, Economic and Financial Affairs(February 1998).

No. 17 The euro: explanatory notes, by Directorate General II, Economic and FinancialAffairs (February 1998).

51

No. 18 Report by the Working Group on “Acceptance of the new prices and scales ofvalues in euros”, by Directorate General XXIII, Enterprise Policy, DistributiveTrades, Tourism and Social Economy and Directorate General XXIV, ConsumerPolicy Service (February 1998).

No. 19 Report of the Expert Working Group “Euro-Education”, by Directorate GeneralXXII, Education, Training and Youth (February 1998).

No. 20 Report by the Working Party “Small businesses and the euro”, by DirectorateGeneral XXIII, Enterprise Policy, Distributive Trades, Tourism and SocialEconomy (February 1998).

No. 21 Update on the practical aspects of the introduction of the euro, by DirectorateGeneral II, Economic and Financial Affairs (February 1998).

No. 22 The introduction of the euro and the rounding of currency amounts, byDirectorate General II, Economic and Financial Affairs (March 1998).

No. 23 From Round Table to Recommendations on practical aspects of the introductionof the euro, by Directorate General II, Economic and Financial Affairs (May1998).

No. 24 The impact of the euro on Mediterranean partner countries, by Jean-PierreChauffour and Loukas Stemitsiotis, Directorate General II, Economic andFinancial Affairs (June 1998).

No. 25 The introduction of the euro - Addendum to the compilation of communitylegislation and related documents, by Directorate General II, Economic andFinancial Affairs (July 1998).

No. 26 The implications of the introduction of the euro for non-EU countries, by PeterBekx, Directorate General II, Economic and Financial Affairs (July 1998).

No. 27 Fact sheets on the preparation of national public administrations to the euro(Status : 15 May 1998), by Directorate General II, Economic and FinancialAffairs (July 1998).

No. 28 Debt redenomination and market convention in stage III of EMU, by MonetaryCommittee (July 1998).

No. 29 Summary of experts’ reports compiled for the euro working group/EuropeanCommission - DG XXIV on psycho-sociological aspects of the changeover to theeuro, by Directorate General XXIV, Consumer Policy and Consumer HealthProtection (November 1998).

No. 30 Implementation of the Commission Recommendation on banking charges for theconversion to the euro, by Directorate General XV, Internal Market and FinancialServices, Directorate General II, Economic and Financial Affairs and DirectorateGeneral XXIV, Consumer Policy and Consumer Health Protection (December1998).

No. 31 How large companies could help their small suppliers and distributors changeover to the euro. Proceedings and conclusions of the Workshop held on 5November 1998 in Brussels. Organised by the Directorate General II and TheAssociation for the Monetary Union of Europe (January 1999).

No. 32 Risk capital markets, a key to job creation in Europe. From fragmentation tointegration - Report prepared by Delphine Sallard, Directorate General II,Economic and Financial Affairs, on a conference organised by the EuropeanCommission on 24 November 1998, in Brussels (January 1999).

No. 33 The impact of the changeover to the euro on community policies, institutions andlegislation (Progress towards implementing the Commission’s Communication ofNovember 1997), by Directorate General II, Economic and Financial Affairs(April 1999).

52

No. 34 Duration of the transitional period related to the introduction of the euro (Reportfrom the Commission to the Council), by Directorate General II, Economic andFinancial Affairs (April 1999).

No. 35 EU Repo markets: opportunities for change, (Report of the Giovannini Group)(October 1999).

No. 36 Migrating to euro - System strategies & best practices recommendations for theadaptation of information systems to the euro, (Report by the Euro WorkingGroup) (October 1999).

No. 37 Euro coins – from design to circulation, by Directorate General II, Economic andFinancial Affairs (May 2000).

No. 38 Communication from the Commission on communications strategy in the lastphases of the completion of EMU, by Directorate General II, Economic andFinancial Affairs (August 2000).

No. 39 Changing to the euro – What would happen to a company on 1 January 2002 thathad not converted to the euro? Advice to managers and their advisers, byFédération des Experts Comptables Européens (August 2000)

No. 40 Conference “Enterprises 2002” – 6 June 2000A round table on the practicalimpact on enterprises at the end of the “transition period” (August 2000)

No. 41 Communication from the Commission on the practical aspects of the euro: stateof play and tasks ahead, by Directorate General II, Economic and FinancialAffairs (August 2000).

No. 42 EMU: The first two years, by Directorate General ECFIN, Economic andFinancial Affairs (March 2001)

economic papers. n° 152. are international deposits tax

Documents