The monetary and fiscal quandary had a devastating influence on financial institution gains, with loss-making banks reporting worldwide advertisement losses of round USD four hundred billion in 2008. This entire document units the industry context for financial institution losses and offers an summary of the tax remedy of such losses in 17 OECD international locations; describes the tax hazards that come up when it comes to financial institution losses from the point of view of either banks and profit our bodies; outlines the incentives that provide upward thrust to these dangers; and describes the instruments profit our bodies need to deal with those strength compliance hazards. It concludes with innovations for profit our bodies and for banks on how dangers regarding financial institution losses can most sensible be controlled and diminished. desk of content material :ForewordExecutive SummaryChapter 1. environment the context for present degrees of financial institution tax lossesChapter 2. power scale/fiscal expense of banks tax lossesChapter three. precis of kingdom principles relating to taxation of financial institution lossesChapter four. major concerns for banks with regards to tax lossesChapter five. Compliance/tax threat matters for profit our bodies with regards to financial institution tax lossesChapter 6. instruments to be had to profit our bodies to deal with compliance hazards with regards to financial institution tax lossesChapter 7. Conclusions and recommendationsAnnex A. state ideas with regards to taxation of financial institution lossesGlossary of acronyms and technical phrases
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Additional info for Addressing Tax Risks Involving Bank Losses
This generally means that losses can be offset only against income from the same income source, thus preventing sideways loss relief, although in some countries which otherwise operate a schedular system, corporate trading losses are available to be offset, sideways, against total corporate profits of the same, and in some cases a previous, year. In addition, since different categories of financial transactions such as payments of interest and dividends may be close substitutes in the hands of a financial institution, generally applicable tax differences between these categories of financial transaction may be set aside for the financial sector.
The share price for these 15 bank groups stands, on average,8 at around 50% of its pre-crisis, January 2007, level. This implies that – over the typical investor’s time horizon – future profits are expected to be around 50% of pre-crisis levels. At that level, it would take banks some three years to utilise realised and unrealised tax losses carried forward. The average9 projected P-E ratio for these 15 bank groups is around 20:1. 10 This too suggests that banks’ profits are expected to show strong, but not spectacular, growth compared with current levels.
There are differences in whether a non-resident company may act as the head of a consolidated group, whether the taxpayer may choose which entities should be included in the consolidated group, whether consolidation is limited to the parent’s share of the profits of foreign entities, and whether or not preconsolidation losses are ring-fenced in the company that incurred them. Carry-over of losses Carry-over of losses (forward or Carry-forward of losses is a feature of all countries participating in this report, with time-limitations (where applicable) ranging ADDRESSING TAX RISKS INVOLVING BANK LOSSES © OECD 2010 3.
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