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
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
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
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
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
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
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
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.
Lif
e In
sura
nce
Tax
atio
nL
ife
Insu
ranc
e T
axat
ion
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
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
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
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
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.
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
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
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
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
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
).
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
).
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
).
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
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?
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
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
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
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
)
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
“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