Finance Ministry seeks tax-law amendments to ease mergers
The Finance Ministry will next week ask for the Cabinet's approval for legal amendments, to facilitate the mergers among financial institutions and insurance companies.
An anonymous government source said that at the Tuesday meeting, the Cabinet would consider tax measures related to reserves of financial institutions and insurance business.
Under the Revenue Code Section 65 (3), the companies can count reserves as expenses, not subjected to taxation. These legal reserves come out of premium income and serve as a provision for non-performing loans or doubtful debts by banks, finance companies, securities companies or credit fonciers, set aside according to requirements.
Under Section 74 (2) and (3), once these companies are merged, their reserves will be merged. Excess reserves, the amount exceeding the legal requirements, are counted as revenue and this revenue must be taxed.
The source said that the laws, which lead to higher costs, have discouraged mergers among financial institutions and insurance companies. To promote mergers, the ministry proposed two bills that will exempt the “extra revenue” from taxation.
