Effective tax rates for bank entities across European Union. The role of loan loss provisions

Figures & data

Table 1. The expected sign of independent variables.

Independent variables	Expected sign
Loan loss provisions (LLP)	–
Equity (EQ)	+
Size (SIZE)	+/-
Capital intensity (K)	–
Profitability (ROA)	+/-
Country-specific effective average tax rate (EATR)	+

Source: Own computations.

Table 2. Descriptive statistics.

Variable	Obs	Mean	Std. Dev.	Min	p1	p50	p99	Max
Effective tax rate	8491	5,63	5,96	0	0	4,73	100	100
Alternative Effective tax rate	8491	30,77	21,96	0	0	25,19	100	100
Loan loss provisions	8491	0,46	1,18	−5,06	−1,04	0,22	4,55	54,94
Size	8491	13,17	2,08	6,11	9,74	12,76	19,87	21,54
Equity	8491	10,13	6,51	−134,46	1,67	9,15	60,32	99,51
Capital intensity	8491	1,36	1,36	0	0,01	1,10	5,81	44,18
Return on assets	8491	0,42	1,77	−62,07	−5,34	0,48	3,67	67,55
Country-specific EATR	8491	25,02	4,31	9	11,6	27,5	35,4	39,40

Source: Own computations.

Table 3. Base results.

Dependent:ETR1	GMM (1)	OLS (2)	PCSE (3)	MLR (4)
LLPs	−0.7067***	−1.0641***	−0.9156***	−1.0528***
	(0.2521)	(0.2196)	(0.2124)	(0.1030)
ETR(-1)	0.6480***	0.2244***	0.3422***	0.2579***
	(0.1217)	(0.0713)	(0.0452)	(0.0114)
Size	−0.7067***	0.1928***	0.1703***	0.2128***
	(0.3363)	(0.0689)	(0.0533)	(0.0492)
Equity	−0.1117	0.0807	0.0456	0.0839***
	(0.0809)	(0.0896)	(0.0540)	(0.0148)
Capital intensity	−0.2331*	−0.4838***	−0.3854***	−0.5479***
	(0.1345)	(0.1378)	(0.0688)	(0.0727)
ROA	0.8914***	0.6910**	0.6648***	0.6862***
	(0.2934)	(0.3275)	(0.2245)	(0.0686)
EATR	0.3715**	−0.1178*	−0.1339*	0.0613**
	(0.1746)	(0.0636)	(0.0732)	(0.0307)
Constant		1.7634	2.1020	−0.2485
		(1.6897)	(1.8045)	(1.0789)
AR(1) test statistic	−2.6656
p value of AR(1) statistic	0.0077
AR(2) test statistic	−0.1157
p value of AR(2) statistic	0.9079
Sargan statistic	2.0619
p value of Sargan statistic	0.3567
R-squared		0.4102	0.4192
LR test–chi2				1431.81***
Number of obs.	6142	6142	6142	6142

Notes: Year and country effects are not reported. Country level clustered robust standard errors in parentheses⁵. The Arellano-Bond test for autocorrelation has a null hypothesis of no autocorrelation. The null hypothesis of no AR (1) is rejected, while that of no AR (2), which is more important in dynamic panel data estimation is not. Meanwhile, the Sargan test of over identifying restrictions has a null hypothesis of “the instruments as a group are exogenous.” The test results indicate that the null hypothesis cannot be rejected, confirming the joint validity of the instruments.

*** p<.01;

** p<.05;

* p<.1.

Source: Own computations.

Table 4. Types of banks.

Dependent:ETR1	All banks	Commercial	Savings	Cooperative
LLPs	−1.0641***	−0.9461***	−1.1471	−0.0988
	(0.2196)	(0.3220)	(0.7075)	(0.1877)
ETR1(-1)	0.2244***	0.1054	0.4159***	0.2387***
	(0.0713)	(0.0819)	(0.0388)	(0.0826)
Size	0.1928***	0.0528	0.1698***	0.2108**
	(0.0689)	(0.0900)	(0.0556)	(0.0929)
Equity	0.0807	0.1428	−0.0396**	0.0335
	(0.0896)	(0.1204)	(0.0179)	(0.0397)
Capital intensity	−0.4838***	−1.0850***	−0.2219*	−0.2580
	(0.1378)	(0.3808)	(0.1168)	(0.1943)
ROA	0.6910**	0.1045	1.4375***	1.6757***
	(0.3275)	(0.4510)	(0.4252)	(0.5427)
EATR	−0.1178*	−0.0817	−1.4681*	0.0011
	(0.0636)	(0.1195)	(0.8816)	(0.0897)
Constant	1.7634	2.7702		−1.8788
	(1.6897)	(3.4364)	(21.0515)	(1.5319)
Method	OLS	OLS	OLS	OLS
R-squared	0.4102	0.1892	0.5485	0.6390
Number of obs.	6142	1113	2887	2142

Note: Country level clustered robust standard errors in parentheses. Year and country effects are not reported.

*** p<.01;

** p<.05;

* p<.1.

Source: Own computations.

Table 5. Different sample selection strategies.

Dependent variable:ETR1	PBT > 0& TAX > 0 (5)	LLP unwinsorized (6)	LLP unwinsorized and PBT > 0&TAX > 0 (7)
LLPs	−1.9161***	−0.0151	−1.8813***
	(0.2929)	(0.5024)	(0.2966)
ETR1(-1)	0.2438***	0.2302***	0.2440***
	(0.0523)	(0.0679)	(0.0524)
Size	0.1930**	0.1801***	0.1923***
	(0.0750)	(0.0687)	(0.0746)
Equity	−0.0820**	0.0671	−0.0846**
	(0.0341)	(0.0913)	(0.0333)
Capital intensity	−0.3533***	−0.4717***	−0.3564***
	(0.0732)	(0.1473)	(0.0740)
ROA	2.4796***	1.0772***	2.4861***
	(0.2141)	(0.2896)	(0.2173)
EATR	0.0144	−0.0791	0.0163
	(0.1093)	(0.0710)	(0.1096)
Constant	−0.6565	0.5831	−0.6762
	(2.8267)	(1.8305)	(2.8248)
Method	OLS	OLS	OLS
R-squared	0.6053	0.4025	0.6053
Number of obs.	5437	6142	5437

Note: Country level clustered robust standard errors in parentheses. Year and country effects are not reported.

*** p<.01;

** p<.05;

* p<.1.

Source: Own computations.

Table 6. Large banks vs. small banks.

Dependent variable:ETR1	Large (8)	Small (9)
LLPs	−1.1930**	−0.9959***
	(0.5666)	(0.2505)
ETR1(-1)	0.4345***	0.1924**
	(0.1337)	(0.0847)
Size	−0.2547	0.3342**
	(0.1673)	(0.1345)
Equity	0.0593	0.0901
	(0.1350)	(0.0952)
Capital intensity	−1.6505***	−0.4256***
	(0.5322)	(0.1215)
ROA	−0.0761	0.8826***
	(0.6073)	(0.3006)
EATR	−0.2896***	0.0294
	(0.0724)	(0.1565)
Constant	13.5180***	−3.4037
	(3.9538)	(3.6421)
Method	OLS	OLS
R-squared	0.4156	0.4155
Number of obs.	741	5401

Note: Country level clustered robust standard errors in parentheses. Year and country effects are not reported.

*** p<.01;

** p<.05;

* p<.1.

Source: Own computations.

Table 7. Alternative Dependent variable (ETR2 - Taxes to Profit before Tax).

Dependent:ETR2	All banks (10)	Commercial (11)	Savings (12)	Cooperative (13)
Loan loss provisions	−1.0677**	−1.3412***	−2.7028***	−0.7609
	(0.5095)	(0.4318)	(0.8625)	(1.0449)
ETR2 (-1)	0.3116***	0.2110***	0.3067***	0.3725**
	(0.1087)	(0.0667)	(0.0863)	(0.1659)
Size	0.7371***	0.0049	−0.0174	0.4150**
	(0.2223)	(0.4081)	(0.1391)	(0.1901)
Equity	−0.1037	−0.1597**	−0.2400*	−0.4761*
	(0.0777)	(0.0715)	(0.1394)	(0.2845)
Capital intensity	0.0326	0.3684	0.0676	−0.0279
	(0.1426)	(0.3275)	(0.3677)	(0.1595)
ROA	0.6312*	0.9747***	0.7603	0.4633
	(0.3681)	(0.3270)	(1.2599)	(0.4895)
EATR	0.0600	1.2069***	−2.2110	−1.2264***
	(0.4176)	(0.4284)	(1.4985)	(0.3668)
Constant	−0.1348	−0.5496	62.3662*	34.5719***
	(10.3314)	(11.9110)	(35.4422)	(7.0762)
Method	OLS	OLS	OLS	OLS
R-squared	0.4853	0.2645	0.6431	0.4716
Number of obs.	6142	1113	2887	2142

Note: Country level clustered robust standard errors in parentheses. Year and country effects are not reported.

*** p<.01;

** p<.05;

* p<.1.

Source: Own computations.

Table 8. Alternative Proxies for LLPs.

Dependent: ETR1	NPLs (14)	RNPLs (15)
NPLs	−0.0352**
	(0.0146)
RNPLs		−0.0068
		(0.0191)
ETR1(-1)	0.3285***	0.3878***
	(0.0464)	(0.0660)
Size	0.1288**	0.1037*
	(0.0573)	(0.0612)
Equity	0.0129	−0.0083
	(0.0412)	(0.0413)
Capital intensity	−0.4978***	−0.4461***
	(0.1149)	(0.1189)
ROA	0.9143***	0.8917***
	(0.2326)	(0.2256)
EATR	−0.1525*	−0.1384*
	(0.0787)	(0.0762)
Constant	5.4929*	8.7917**
	(2.8116)	(4.3285)
Method	OLS	OLS
Sample	All banks	All banks
R-squared	0.4047	0.4281
Number of obs.	3145	3245

Note: Country level clustered robust standard errors in parentheses. Year and country effects are not reported.

*** p<.01;

** p<.05;

* p<.1.

Source: Own computations.

Table

Country	All banks	Commercial	Cooperative	Savings
AT	502	33	103	366
BE	34	26	4	4
BG	24	22	1	1
CY	15	13	1	1
CZ	18	16	2
DE	928	44	476	408
DK	61	29	4	28
EE	7	7
ES	148	56	62	30
FI	28	20	2	6
FR	191	98	70	23
GB	108	106		2
GR	8	7	1
HR	30	28	1	1
HU	17	16	1
IE	8	8
IT	558	97	424	37
LT	7	7
LU	9	8		1
LV	18	18
MT	10	8	1	1
NL	30	28	1	1
PL	36	34	1	1
PT	27	20	2	5
RO	24	21	1	2
SE	74	25		49
SI	17	14	2	1
SK	6	4		2
Total	2943	813	1160	970

Source: Own computations.

Table

Variable	Commercial	Cooperative	Savings
ETR1	5,75	6,09	5,15
ETR2	26,23	34,27	29,80
LLPs	0,88	0,46	0,26
Size	14,97	12,89	12,53
Equity	10,77	9,81	10,12
Capital intensity	1,04	1,43	1,45
ROA	0,24	0,44	0,49
N	1113	2142	2887

Source: Own computations.