Does Household Tax Burden Have an Impact on Individuals’ Savings in Banks in the Form of Deposits? The case of the European Union

This study aims to evaluate the impact of the effective tax burden (ETR) on household savings in the form of deposits in European Union (EU) countries. Specifically, it examines how the ETR, encompassing personal income taxes, indirect taxes, and labour ETR, influences households' propensity to allocate their savings into bank deposits. To investigate this relationship, a comprehensive dataset spanning 21 years (2002-2021) is utilised, combining information on households' income and taxes paid. By employing regression analysis, this study seeks to provide a thorough analysis of the association between the ETR and household savings in the form of bank deposits. Understanding the factors that drive households' decisions to deposit their savings in banks is crucial for policymakers and financial institutions. By examining the impact of the ETR on household deposits, this research contributes to the existing literature on the determinants of household savings behaviour. The findings can offer valuable insights for policymakers in designing tax policies that encourage savings and enhance the stability of the banking sector. Analysing the relationship between the ETR and household deposits provides a nuanced understanding of how tax burdens affect households' financial decisions. By focusing on bank deposits as a form of savings, this study accounts for the prevalence of such accounts in both developed and developing economies, highlighting the significance of bank deposits as a financial instrument for households across different countries. The methodological approaches used in this study can be applied to similar research projects conducted in other countries, thereby enhancing the transferability of the findings.