Optimal Taxation of Banks in Financial Sector Regulation in Uzbekistan: Practical Approach

Odiljon Sayfiddinovich Komolov

doi:10.2139/ssrn.2731543

Abstract

Global financial crisis made most of advanced and developing economies review and re-examine the relevance of fiscal and banking policy regimes. Existing fiscal gap and financial market disorders led to the introduction of new taxes and mandatory fees for banks for double edged reasons – bridging the fiscal gap and bank capital regulation. In a harsh economic condition most banks required the governments to rethink the taxation policy for financial institutions. Most policymakers and researchers are devising diverse proposals on optimal taxation which meet the needs of both parties. This paper studies the international bank taxation policies and recent development, and examines the opportunities of introduction of optimal taxation for banks in banking system of Uzbekistan.

Highlights

The banking sector plays a crucial role in the allocation of resources, capital circulation and mobility, and any form of distortion in its functioning is likely to have economy-wide effects (Albertazzi and Gambacorta, 2007)
Academics, and regulators sought the best approach to taxing financial institutions and their activities in the financial markets with two reasons: (a) ensuring banking system stability through preventing them carrying out overly risky activities and (b) tightening the capital regulations (Chaudhry et al, 2014)
Because after global financial crisis, bank taxation debates moved to the agenda of several international financial organizations due to spread of global financial turbulence and inadequacy of pre-crisis regulatory framework to cope with large financial shocks

Summary

Introduction

The banking sector plays a crucial role in the allocation of resources, capital circulation and mobility, and any form of distortion in its functioning is likely to have economy-wide effects (Albertazzi and Gambacorta, 2007). A variety of taxes on financial institutions have been recently proposed or enacted in order to (a) to address the budgetary expenditures shifted by financial crisis (ex-post), b) to accumulate reserve funds to address future crises (exante), c) to strengthen banks’ stability and efficiency positions and to target levels of bank risks, d) to manage and mitigate systemic risk in banking system. Especially developed economies revised bank taxation policies and made significant amendments for fiscal and financial regulation purposes. In 2010, the U.S President Barack Obama proposed Financial Crisis Responsibility Fee as an alternative to cost-of-equity tax deduction allowances to alter debt-to-equity www.iiste.org ratios This tax is widely referred to as a tax which imposes a 0.15% levy on liabilities of financial firms that hold more than $50 billion in assets. VAT taxes are levied from limited types of financial services in order to keep the market power of banks in balance

Social infrastructure development tax Property tax

Conclusions