Value adjustments to loans are deductible from taxable income each year only up to 0.3 per cent of a bank’s total outstanding loans; writedowns exceeding that amount are deducted over a period of eighteen years. The limit and the rules on the writedown period have been tightened repeatedly in recent years.
It is difficult to see the economic justification or to find comparable provisions in the other major European countries. In France, Germany and the United Kingdom, value adjustments are tax-deductible on a loan-by-loan basis, in line with those stated in the accounts; in France and Germany, flat-rate allocations to provisions are also allowed.