Culprit, Accomplice, or Bystander? Tax Policy and the Shaping of the Crisis

Michael Keen, Alexander Klemm and Victoria Perry

in Taxation and the Financial Crisis

Published in print February 2012 | ISBN: 9780199698165
Published online May 2012 | e-ISBN: 9780191738630 | DOI:

Show Summary Details


Did taxation have any role in precipitating the financial crisis? Are there lessons to be drawn for tax reform once the crisis has passed? This chapter reviews the main channels by which tax effects might have been felt, and which may require forceful attention. These include, in particular, the large tax biases favouring debt finance, and, in some countries, investment in housing. The complexities of national tax codes, and the international interaction of these, have, moreover, encouraged the use of complicated financial instruments and international tax planning, reducing transparency. Tax distortions did not trigger the 2008 crisis—in the sense that there are no obvious tax changes likely to have triggered it—but they are likely to have contributed by leading to higher leverage and more complexity than would otherwise have been the case. Most of these distortions have long been a source of concern, but dealing with them may be more important than previously supposed.

Keywords: tax policy; financial crisis; debt bias; real estate taxation

Chapter.  14297 words.  Illustrated.

Subjects: Financial Markets

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.