The Use of Tax Law from a Macroprudential Perspective: The Impact of Some Recent Tax Measures on Procyclicality and Banks’ Stability

Bank of Italy, Notes on Financial Stability and Supervision, No. 1, April 2014

6 Pages Posted: 10 May 2014

Date Written: April 30, 2014

Abstract

A number of recent changes to Italian tax law have important implications for financial stability. The taxation of banks’ loan losses has been revised, attenuating its procyclicality, encouraging the adoption of more prudential loan valuation policies and contributing to the transparency of banks’ balance sheet. For all firms, financial and non-financial alike, the allowance for corporate equity (ACE) system, which reduces the penalization of equity with respect to debt financing, has been reinforced, encouraging capital strengthening. Lastly, changes to the taxation of hybrid capital fund-raising have removed the impediments to issuing subordinated securities.

Keywords: financial stability, taxation of banks

JEL Classification: G21, H25

Suggested Citation

De Vincenzo, Alessio and Ricotti, Giacomo, The Use of Tax Law from a Macroprudential Perspective: The Impact of Some Recent Tax Measures on Procyclicality and Banks’ Stability (April 30, 2014). Bank of Italy, Notes on Financial Stability and Supervision, No. 1, April 2014. Available at SSRN: https://ssrn.com/abstract=2434682 or http://dx.doi.org/10.2139/ssrn.2434682

Alessio De Vincenzo (Contact Author)

Bank of Italy ( email )

Via Nazionale, 187
00184 Roma
Italy
+39-06-47924446 (Phone)

Giacomo Ricotti

Bank of Italy ( email )

Via Nazionale 91
VIa Pastrengo 14
Rome, 00184
Italy

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