Financial Information Transparency

Abstract

Over the years, companies have not been required to disclose information about their activities, profits, and the taxes that they pay in all the countries where they operate, which has allowed them to hide their presence in many low-tax jurisdictions. For this reason, country-by-country reporting (CbCR) has emerged as one of the measures to increase organizational transparency. With a sample of the 36 largest European banks, based in 11 EU countries, in more than 90 jurisdictions around the world, this study aims to analyze the relationship between European banks' presence in tax havens, effective tax rates, performance, and productivity. Based on 3587 observations, the results reveal a tendency for European banks to move their profits to tax havens, which allows them to pay less tax or none. In addition, the results show that banks with lower effective tax rates have better performance; however, they did not prove a significant relationship with productivity. This study highlights the importance of the CbCR in the fight against tax evasion and profit shifting.