Non-performing Loans and Government Taxes in the Albanian Banking System

Abstract

Following the financial crisis of 2008, banking institutions all over the world have been reviewing their policies and monitoring the main indicators that might warn a possible default or crisis. One of the most important indicators consistently under control has been the non-performing loans. A lot of efforts to explain the non performing loans factors have taken place in Albania including both macroeconomic and microeconomic factors. This study includes a special reference to the non-performing loans indicator being affected by certain macroeconomic factors, especially by corporate taxes, which has not been studied before. The in-depth analysis considers the following variables: GDP growth rate, the inflation rate, the interest rate and corporate taxes as a dummy variable and includes all banks for a period of 5 years. The study aims to find if there exists any relationship between the NPLs ratio and corporate taxes following the rationale of NPLs being increased as a consequence of tax ratio increased, due to several governmental policies. The results of the regression analysis used, showed up that interest rates have a statistically important impact on non-performing loans. The corporate taxes variable proves to be statistically significant at a level of 90%, which actually gives the possibility for further research in a wider database for a larger time period.

DOI: 10.5901/mjss.2016.v7n6p129