Spatial patterns and local banks’ tax behaviour: an empirical analysis in Italy

In this study, we consider the spatial dependence effects in an empirical model measuring local banks’ tax behaviour, assessing the interdependence between geographical units and the related spillover effects. Our results strongly support the existence of co-movements among banks’ tax avoidance policies. The findings rely on the assumption local banks compete mainly among themselves, even on the funding side, and therefore unfair tax behaviour can trigger loss of customers, which limits banks’ tax avoidance activities. However, neighbours’ adoption of opportunistic tax strategies can remove the competition hurdle in pursuing tax avoidance policies. Our findings point out a virtuous effect of customer pressure, which could take effect in other areas of bank management.