Influence of Corporate Income Tax to Loan Loss Provision: Evidence from Uzbekistan (original) (raw)

This article is devoted to the analysis of the impact of corporate income tax on compulsory reserves created by commercial banks for possible loan loss provision. In the majority of countries banks are required to create compulsory reserves for potential loan loss provisions, and the corporate tax regime applies tax deductions to these compulsory reserves. The corporate tax system facilitates timely coverage of potential loan loss provision. In addition, corporate taxation is an essential factor in the transparency of banks’ financial statements. The research has revealed that reserves for potential loan loss provision are used primarily for profit regulator purposes, not to regulate capital. This implies that when deducting the amount of total reserves for tax purposes of banks the loan loss provision is positively related to the corporate income tax rate. The analysis of the selected commercial banks has confirmed that the impact of corporate income tax is more significant for the...

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