+ All Categories
Home > Documents > Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance...

Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance...

Date post: 23-Jun-2020
Category:
Upload: others
View: 5 times
Download: 0 times
Share this document with a friend
29
Life Insurance Product Taxation: Life Insurance Product Taxation: Implications for Economic Implications for Economic Development Development VIII Conference on Insurance Regulation and VIII Conference on Insurance Regulation and Supervision in Latin America Supervision in Latin America 10 May 2007 10 May 2007 Harold D. Skipper Harold D. Skipper Emeritus Professor of Risk Management and Insurance Emeritus Professor of Risk Management and Insurance Georgia State University Georgia State University Atlanta, Georgia/USA Atlanta, Georgia/USA
Transcript
Page 1: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Lif

e In

sura

nce

Pro

du

ct T

axat

ion

: L

ife

Insu

ran

ce P

rod

uct

Tax

atio

n:

Imp

licat

ion

s fo

r E

con

om

ic

Imp

licat

ion

s fo

r E

con

om

ic

Dev

elo

pm

ent

Dev

elo

pm

ent

VIII

Co

nfe

ren

ce o

n In

sura

nce

Reg

ula

tio

n a

nd

V

III C

on

fere

nce

on

Insu

ran

ce R

egu

lati

on

an

d

Su

per

visi

on

in L

atin

Am

eric

aS

up

ervi

sio

n in

Lat

in A

mer

ica

10 M

ay 2

007

10 M

ay 2

007

Har

old

D. S

kipp

erH

arol

d D

. Ski

pper

Em

erit

us P

rofe

ssor

of

Ris

k M

anag

emen

t an

d In

sura

nce

Em

erit

us P

rofe

ssor

of

Ris

k M

anag

emen

t an

d In

sura

nce

Geo

rgia

Sta

te U

nive

rsit

yG

eorg

ia S

tate

Uni

vers

ity

Atl

anta

, Geo

rgia

/USA

Atl

anta

, Geo

rgia

/USA

Page 2: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Out

line

of R

emar

ksO

utlin

e of

Rem

arks

The

Eco

nom

ic a

nd S

ocia

l Rol

e of

Lif

e In

sura

nce

Lif

e In

sura

nce

Tax

atio

nE

stab

lishi

ng L

ife

Insu

ranc

e T

ax P

olic

y

Page 3: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

The

Eco

nom

ic a

nd S

ocia

l Rol

e T

he E

cono

mic

and

Soc

ial R

ole

of L

ife

Insu

ranc

eof

Lif

e In

sura

nce

Page 4: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Why

fin

anci

al in

term

edia

ries

are

W

hy f

inan

cial

inte

rmed

iari

es a

re

esse

ntia

l for

mod

ern

soci

ety

esse

ntia

l for

mod

ern

soci

ety

Red

uce

tran

sact

ions

cos

ts in

bri

ngin

g to

geth

er

borr

ower

s an

d sa

vers

Cre

ate

liqui

dity

Fac

ilita

te e

cono

mie

s of

sca

le in

inve

stm

ent

Eng

age

in r

isk

man

agem

ent

by .

. .–

Pri

cing

ris

k–

Eng

agin

g in

ris

k tr

ansf

orm

atio

n–

Eng

agin

g in

ris

k po

olin

g

Page 5: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

As

spec

ializ

ed f

inan

cial

A

s sp

ecia

lized

fin

anci

al

inte

rmed

iari

es, l

ife

insu

rers

…in

term

edia

ries

, lif

e in

sure

rs …

•P

rom

ote

fina

ncia

l sta

bilit

y fo

r fa

mili

es a

nd

busi

ness

es•

Subs

titu

te p

arti

ally

for

gov

ernm

ent

secu

rity

•F

acili

tate

tra

de a

nd c

omm

erce

•M

obili

ze n

atio

nal s

avin

gs, e

spec

ially

long

er t

erm

•F

oste

r m

ore

effi

cien

t ca

pita

l allo

cati

on

Page 6: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Dev

elop

ing

coun

trie

s sh

ould

D

evel

opin

g co

untr

ies

shou

ld

grow

fas

ter

. . .

grow

fas

ter

. . .

Rat

e of

E

cono

mic

Gro

wth

GD

P p

er C

apit

aCan

ada

Col

ombi

a

Chi

le

Page 7: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Rel

atio

nshi

p be

twee

n lif

e in

sura

nce

Rel

atio

nshi

p be

twee

n lif

e in

sura

nce

and

econ

omic

dev

elop

men

t . .

.an

d ec

onom

ic d

evel

opm

ent

. . .

GD

P p

er c

apit

a

Low

Hig

h

Pre

miu

ms

to

GD

P

Low

Hig

h

Page 8: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Tak

ing

econ

omic

sta

tus

into

acc

ount

, T

akin

g ec

onom

ic s

tatu

s in

to a

ccou

nt,

Lat

in A

mer

ica

life

insu

ranc

e de

man

d L

atin

Am

eric

a lif

e in

sura

nce

dem

and

mig

ht b

e lo

w*

. . .

mig

ht b

e lo

w*

. . .

Lat

in A

mer

ica

Ven

ezu

ela

Ch

ile

Sp

ain

Bra

sil

Arg

enti

na

Mex

ico

Uru

gu

ayC

olo

mb

ia

Per

u

GD

P p

er c

apit

a

Low

Hig

h

Pre

miu

ms

to

GD

P

Low

Hig

h

*Cha

rt n

ot to

pre

cise

sca

le.

Page 9: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Lif

e In

sura

nce

Tax

atio

nL

ife

Insu

ranc

e T

axat

ion

Page 10: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Pur

pose

s of

Tax

atio

nP

urpo

ses

of T

axat

ion

•T

o ra

ise

reve

nue

•T

o pr

omot

e ec

onom

ic g

oals

•T

o pr

omot

e so

cial

goa

ls

Page 11: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Des

irab

le T

rait

s of

Tax

Sys

tem

Des

irab

le T

rait

s of

Tax

Sys

tem

Sim

plic

ity

–no

t co

mpl

ex a

dmin

istr

ativ

ely,

lo

w c

ost

of c

olle

ctio

n, n

ot e

asily

eva

ded,

eas

y co

mpl

ianc

e

Equ

ity

–ea

ch e

ntit

y sh

ould

pay

its

“fai

r sh

are”

Neu

tral

ity

–in

dust

ries

, ent

itie

s, p

rodu

cts

and

serv

ices

sho

uld

be t

axed

equ

ival

entl

y in

th

e in

tere

st o

f pr

omot

ing

nati

onal

eco

nom

ic

effi

cien

cy

Page 12: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Lif

e In

sura

nce

Con

sum

er T

axat

ion:

L

ife

Insu

ranc

e C

onsu

mer

Tax

atio

n:

Indi

vidu

als

Indi

vidu

als

Pre

miu

ms

Ann

uity

con

side

rati

ons

may

be

tax

dedu

ctib

le (

reti

rem

ent)

Lif

e pr

emiu

ms

som

etim

e en

joy

tax

pref

eren

ce b

ut t

rend

is

othe

rwis

e

Ben

efit

sA

nnui

ties

–In

tere

st c

redi

ts o

ften

tax

def

erre

d fo

r no

n-ta

x-qu

alif

ied

annu

itie

sP

ayou

ts u

sual

ly s

ubje

ct to

inco

me

taxa

tion

to

exte

nt n

ot a

lrea

dyta

xed

Lif

e in

sura

nce

Div

iden

ds a

nd in

tere

st o

n ca

sh v

alue

oft

en t

ax f

ree

or t

ax d

efer

red

Dea

th b

enef

its

usua

lly in

com

e-ta

x fr

ee b

ut s

ubje

ct t

o es

tate

dut

ies

Page 13: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Lif

e In

sura

nce

Con

sum

er T

axat

ion:

L

ife

Insu

ranc

e C

onsu

mer

Tax

atio

n:

Em

ploy

ers

Em

ploy

ers

Pre

miu

ms

Pay

men

ts b

y em

ploy

ers

tow

ard

cost

s of

life

, hea

lth

and

reti

rem

ent

bene

fits

tha

t be

nefi

t em

ploy

ees

are

ordi

nari

ly d

educ

tibl

e to

bus

ines

sSu

ch p

aym

ents

oft

en a

re n

ot t

axab

le a

s in

com

e to

em

ploy

ee,

subj

ect

to li

mit

s

Pay

men

ts b

y em

ploy

ers

for

bene

fits

tha

t in

ure

to t

he

empl

oyer

are

not

ord

inar

ily d

educ

tibl

e to

bus

ines

s

Ben

efit

sL

ife

insu

ranc

e de

ath

bene

fits

pai

d to

em

ploy

ees

or

thei

r fa

mili

es u

sual

ly a

re n

ot t

axab

le t

o th

em

Page 14: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Insu

ranc

e C

onsu

mer

Tax

atio

n:

Insu

ranc

e C

onsu

mer

Tax

atio

n:

Val

ue A

dded

Tax

(V

ST/I

VA

)V

alue

Add

ed T

ax (

VST

/IV

A)

Nat

ure

–ta

x em

bedd

ed in

pro

duct

pri

ce th

at is

pai

d by

fi

nal c

onsu

mer

s, w

hich

is le

vied

aga

inst

the

val

ue a

dded

at

eac

h st

age

of t

he p

rodu

ctio

n ch

ain.

Rel

ies

on t

axes

on

outp

uts

wit

h cr

edit

s fo

r ta

xed

inpu

ts

on a

tra

nsac

tion

-by-

tran

sact

ion

basi

s.C

an b

e eq

uita

ble

and

neut

ral a

nd n

ot o

verl

y co

mpl

ex

for

good

s an

d se

rvic

es w

ith

expl

icit

pric

es –

whe

n w

hat

is p

aid,

is t

he p

rice

.H

owev

er, m

ost

pric

es f

or f

inan

cial

inte

rmed

iati

on

serv

ices

, inc

ludi

ng in

sura

nce

serv

ices

, are

impl

icit

pric

es

–w

hat

is p

aid

for

the

serv

ice

is n

otth

e pr

ice,

so

a pr

ice

mus

t so

meh

ow b

e im

plie

d.

Page 15: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Lif

e In

sura

nce

Con

sum

er T

axat

ion:

L

ife

Insu

ranc

e C

onsu

mer

Tax

atio

n:

Val

ue A

dded

Tax

(V

ST/I

VA

)V

alue

Add

ed T

ax (

VST

/IV

A)

Pre

miu

ms

for

life

insu

ranc

e ca

n co

ntai

n th

ree

com

pone

nts:

1.C

ontr

ibut

ion

to t

he in

sura

nce

pool

(i.e

., pu

re f

inan

cial

in

term

edia

tion

)

2.C

harg

e to

rei

mbu

rse

the

insu

rer

for

adm

inis

trat

ing

the

pool

3.C

ontr

ibut

ion

to p

olic

y sa

ving

s (p

ure

fina

ncia

l in

term

edia

tion

).

Val

ue a

dded

in li

fe in

sura

nce

resi

des

only

in t

he

seco

nd c

ompo

nent

, so

IVA

sho

uld

appl

y on

ly to

it

No

gove

rnm

ents

sub

ject

life

insu

ranc

e to

IV

A b

ecau

se

of a

dmin

istr

ativ

e an

d pr

acti

cal c

ompl

exit

y of

doi

ng s

o

Page 16: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Insu

ranc

e C

ompa

ny T

axat

ion

Insu

ranc

e C

ompa

ny T

axat

ion

Inco

me

Tax

atio

n –

can

be m

ade

equi

tabl

e an

d ne

utra

l but

usu

ally

not

sim

ple

I-E

or

vari

atio

ns (

I-E

+U)

–co

mbi

ned

insu

rer

and

insu

red

tax

on in

vest

men

t in

com

e.In

dire

ct T

axat

ion

–no

t eq

uita

ble

or

neut

ral b

ut u

sual

ly s

impl

eP

rem

ium

tax

atio

nP

araf

isca

ltax

es s

uch

as a

tax

on

prem

ium

s,

stam

p du

ties

, etc

., to

cov

er s

peci

fic

acti

viti

es

Page 17: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Est

ablis

hing

Sou

nd T

ax P

olic

y E

stab

lishi

ng S

ound

Tax

Pol

icy

Tow

ard

Lif

e In

sura

nce

Tow

ard

Lif

e In

sura

nce

Page 18: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Rea

sona

ble

Lif

e In

sura

nce

Tax

atio

n:

Rea

sona

ble

Lif

e In

sura

nce

Tax

atio

n:

The

Goa

l of

Sim

plic

ity

The

Goa

l of

Sim

plic

ity

Aim

for

sim

plic

ityby

avo

idin

g co

mpl

icat

ed t

ax

adm

inis

trat

ion

and

com

plia

nce

cost

s by

–M

inim

izin

g nu

mbe

r of

taxe

s le

vied

on

life

insu

ranc

e an

d lif

e in

sure

rs–

Avo

idin

g tr

ansa

ctio

ns ta

xes

(e.g

., st

amp

dutie

s) a

nd c

apita

l or

ass

et ta

xes

(whi

ch a

re a

dra

g on

inte

rmed

iatio

n)–

Avo

idin

g sa

les

taxe

s an

d ot

her

taxa

tion

of p

rem

ium

s–

Not

tryi

ng to

impl

emen

t VA

T o

n lif

e in

sura

nce

unle

ss th

e O

EC

D c

ount

ries

“ge

t it r

ight

”–

Rel

ying

on

esta

blis

hed

regu

lato

ry p

ract

ices

in ta

x ad

min

istr

atio

n to

ext

ent f

easi

ble

–M

akin

g lif

e in

sura

nce

taxa

tion

com

patib

le w

ith n

atio

nal t

ax

stru

ctur

e

Page 19: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Num

ber

of t

ax p

aym

ents

per

yea

r,

Num

ber

of t

ax p

aym

ents

per

yea

r,

sele

cted

cou

ntri

esse

lect

ed c

ount

ries

37

810

10

23

3334

4141

4953

6868

010203040506070 Norway Spain Ecu

ador Canada ChileBra

zil Paragu

ayArg

entin

a Bolivia Uru

guay M

exico

Peru

ColombiaVen

ezuela

Sour

ce:

Pri

cew

ater

hous

eCoo

pers

and

Wor

ld B

ank

Gro

up (

2006

).

Page 20: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Tim

e to

com

ply:

Ave

rage

hou

rs p

er

Tim

e to

com

ply:

Ave

rage

hou

rs p

er

year

, sel

ecte

d co

untr

ies

year

, sel

ecte

d co

untr

ies

8711

930

032

842

443

245

655

260

060

261

586

41,08

02,60

0

0

500

1,00

0

1,50

0

2,00

0

2,50

0

3,00

0

Norway Canada Uru

guay

Paragu

ay Peru Chile Colombia M

exico Ecu

ador Spain Argen

tina

Venezu

ela Bolivia Brazil

Sour

ce:

Pri

cew

ater

hous

eCoo

pers

and

Wor

ld B

ank

Gro

up (

2006

).

Page 21: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Eff

ecti

ve t

ax r

ate

as p

erce

ntag

e of

E

ffec

tive

tax

rat

e as

per

cent

age

of

com

mer

cial

pro

fits

com

mer

cial

pro

fits

2628

3537

4143

4346

5259

7280

83

117

020406080100

120

Percentage

Chile Urugu

ay Ecuador Mex

icoPer

u CanadaPara

guay Norway

Venezu

elaSpain Bra

zil Bolivia Colombia

Argen

tina

Sour

ce:

Pri

cew

ater

hous

eCoo

pers

and

Wor

ld B

ank

Gro

up (

2006

).

Page 22: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Rea

sona

ble

Lif

e In

sura

nce

Tax

atio

n:

Rea

sona

ble

Lif

e In

sura

nce

Tax

atio

n:

The

Goa

l of

Equ

ity

The

Goa

l of

Equ

ity

Aim

for

tax

equ

ityby

Ens

urin

g th

at to

tal t

ax b

urde

n on

life

insu

ranc

e an

d lif

e in

sure

rs is

not

exc

essi

ve–

Usi

ng lo

wes

t fe

asib

le t

ax r

ate

and

broa

dest

pos

sibl

e ta

x ba

se Hig

her

tax

rate

s ty

pica

lly f

ail t

o le

ad t

o hi

gher

rev

enue

s in

de

velo

ping

cou

ntri

es a

s th

ey p

ush

busi

ness

es in

to in

form

al

econ

omy

–E

nsur

ing

that

sm

all o

r un

prof

itab

le li

fe in

sure

rs

shou

lder

cor

resp

ondi

ng t

ax b

urde

ns b

oth

for

reas

ons

of e

quit

y an

d to

avo

id e

xace

rbat

ing

solv

ency

pro

blem

s

Page 23: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Rea

sona

ble

Lif

e In

sura

nce

Tax

atio

n:

Rea

sona

ble

Lif

e In

sura

nce

Tax

atio

n:

The

Goa

l of

Neu

tral

ity

The

Goa

l of

Neu

tral

ity

Aim

for

neu

tral

ityby

est

ablis

hing

bal

ance

wit

hin

the

nati

onal

fis

cal e

nvir

onm

ent

Thu

s, in

dust

ries

, ent

itie

s, p

rodu

cts

and

serv

ices

sh

ould

be

taxe

d eq

uiva

lent

ly in

the

inte

rest

of

prom

otin

g na

tion

al e

cono

mic

eff

icie

ncy,

unl

ess

a co

mpe

lling

cas

e ca

n be

mad

e fo

r sp

ecif

ic

conc

essi

ons.

Doe

s a

com

pelli

ng c

ase

exis

t fo

r ta

x co

nces

sion

s fo

r lif

e in

sura

nce?

Page 24: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Pos

sibl

e R

atio

nale

s fo

r L

ife

Pos

sibl

e R

atio

nale

s fo

r L

ife

Insu

ranc

e T

ax C

once

ssio

ns:

IIn

sura

nce

Tax

Con

cess

ions

: I

Enc

oura

ges

grea

ter

nati

onal

sav

ings

, but

–V

iola

tes

neut

ralit

y pr

inci

ple

unle

ss s

ame

conc

essi

on

exte

nded

to

all f

inan

cial

inte

rmed

iari

es–

Gov

ernm

ent

tax

reve

nue

and

thus

sav

ings

may

su

ffer

B

ut m

ay c

onsi

der

enha

nced

pri

vate

sav

ings

will

be

used

m

ore

effi

cien

tly

than

gov

ernm

ent

savi

ngs

–N

ot c

lear

tha

t to

tal n

atio

nal s

avin

gs w

ill in

crea

se

beca

use

peop

le m

ight

Shif

t fr

om t

axab

le t

o no

n-ta

xabl

e sa

ving

sT

arge

t sa

vers

may

sav

e le

ss

Page 25: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Pos

sibl

e R

atio

nale

s fo

r L

ife

Pos

sibl

e R

atio

nale

s fo

r L

ife

Insu

ranc

e T

ax C

once

ssio

ns:

IIIn

sura

nce

Tax

Con

cess

ions

: II

Lif

e in

sura

nce

carr

ies

posi

tive

spi

llove

r ef

fect

s (e

xter

nalit

ies)

for

soc

iety

as

a w

hole

and

go

vern

men

t po

licy

shou

ld e

ncou

rage

its

purc

hase

–R

elie

ves

gove

rnm

ent

part

ially

of

need

to

prov

ide

gene

rous

eco

nom

ic s

ecur

ity

prog

ram

s

Eco

nom

ic g

row

th is

enh

ance

d by

hav

ing

a va

riet

y of

str

ong

fina

ncia

l int

erm

edia

ries

, and

if d

omes

tic

life

insu

ranc

e in

dust

ry is

und

erde

velo

ped,

go

vern

men

t m

ay w

ish

to h

aste

n th

e in

dust

ry’s

gr

owth

via

tax

con

cess

ions

Page 26: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Pos

sibl

e R

atio

nale

s fo

r L

ife

Pos

sibl

e R

atio

nale

s fo

r L

ife

Insu

ranc

e T

ax C

once

ssio

ns:

III

Insu

ranc

e T

ax C

once

ssio

ns:

III

Eco

nom

ic g

row

th is

enh

ance

d by

mor

e lo

ng-

term

fin

ance

, and

con

trac

tual

sav

ings

in

stit

utio

ns s

uch

as li

fe in

sure

rs (

and

pens

ion

fund

s) c

an b

e es

peci

ally

impo

rtan

t so

urce

s of

suc

h fi

nanc

e

Page 27: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Mea

ns o

f P

rovi

ding

Lif

e In

sura

nce

Mea

ns o

f P

rovi

ding

Lif

e In

sura

nce

Tax

atio

n C

once

ssio

ns:

IT

axat

ion

Con

cess

ions

: I

Tax

con

cess

ion

(ded

ucti

on o

r cr

edit

) to

war

d pr

emiu

m p

aym

ents

on

qual

ifyi

ng p

olic

ies

Tax

pre

fere

nce

on li

fe in

sura

nce

and/

or

annu

ity

cash

val

ues

–D

efer

red

taxa

tion

on

insi

de b

uild

up (

e.g.

, onl

y on

sur

rend

er)

–N

o ta

xati

on o

n in

side

bui

ldup

(e.

g., o

n su

rren

der

if h

eld

for

min

imum

per

iod

and/

or

on d

eath

)

Page 28: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

Mea

ns o

f P

rovi

ding

Lif

e In

sura

nce

Mea

ns o

f P

rovi

ding

Lif

e In

sura

nce

Tax

atio

n C

once

ssio

ns:

IIT

axat

ion

Con

cess

ions

: II

Tax

pre

fere

nce

on li

fe in

sura

nce

deat

h be

nefi

ts–

Nei

ther

inco

me

nor

esta

te t

axat

ion

–N

o in

com

e ta

xati

on

Ext

end

tax

conc

essi

ons

to li

fe in

sure

r vi

a ad

vant

ageo

us in

com

e or

oth

er t

ax s

yste

m

Page 29: Life Insurance Product Taxation: Implications for Economic ... · Reasonable Life Insurance Taxation: The Goal of Simplicity) Aim for simplicity by avoiding complicated tax administration

“Ach

ievi

ng w

ell

“Ach

ievi

ng w

ell --

func

tion

ing

fina

ncia

l mar

kets

fu

ncti

onin

g fi

nanc

ial m

arke

ts

and

inst

itut

ions

, whi

ch le

vera

ge s

avin

gs a

nd

and

inst

itut

ions

, whi

ch le

vera

ge s

avin

gs a

nd

chan

nel t

hem

into

pro

duct

ive

inve

stm

ents

, sho

uld

chan

nel t

hem

into

pro

duct

ive

inve

stm

ents

, sho

uld

be a

pol

icy

prio

rity

for

gov

ernm

ents

….”

be a

pol

icy

prio

rity

for

gov

ernm

ents

….”

Lou

is A

lber

to M

oren

o, P

resi

dent

Lou

is A

lber

to M

oren

o, P

resi

dent

Inte

rIn

ter --

Am

eric

an D

evel

opm

ent

Ban

kA

mer

ican

Dev

elop

men

t B

ank

from

rem

arks

del

iver

ed in

fr

om r

emar

ks d

eliv

ered

in C

arte

gena

Car

tege

na, 1

0 A

ugus

t 20

06, 1

0 A

ugus

t 20

06


Recommended