Banks and Tax Systems

This chapter is concerned with the question of why tax is so often at the heart of highly structured trades entered into by banks. After first considering the position of banks in relation to tax systems, it sets out the reasons why banks have a unique ability to exploit such systems in order to generate revenue streams for their business. It then discusses the features in a tax system that have a tendency to contribute to the process by which rules in that system are exploited. These features include both the substantive tax rules and the arrangements for the administration of tax systems. The discussion explains why the fragmentation and inordinate complexity of the rules and the manner in which they are enforced and administered often have the collective and paradoxical effect of facilitating, rather than hindering, the exploitation of the tax system.