The insurance lobbyists have come out fighting. Representing the industry in
the UK, the Association of British Insurers has pulled together some research of
insurance FDs and chief execs, which strongly indicates that they are none too
happy about the UK’s tax regime.
So unhappy, in fact, that 80% of them expect the number of UK insurers to
fall if our tax system remains unchanged over the next five years. Backing up
the research, and other insurance industry concerns, the ABI’s chief economist
Rebecca Driver wrote in the Telegraph to let us all know how important insurers
are and that they need a proverbial cuddle.
Driver, a key player at the ABI, overseeing its research and evidence for its
lobbying strategy, stated in the article that Lord Turner’s recent comments
regarding the FSA having to be “very wary” of seeing the competitiveness of
London as a major aim, was itself “dangerous”.
“He did acknowledge that this statement would not be popular. Unfortunately
it is also dangerous – not only for the economy, but for the millions of
households and businesses who need the financial services industry for their
insurance, bank accounts and pensions.”
She also proposed changes to the tax regime in the UK to help protect the
sector, albeit admitting that a cut in corporation tax was unlikely in the
current economic environment.
What’s going to happen?
Driver flagged up the report’s recommendations for reforming the controlled
foreign company regime by moving it away from its “current bias” of returns from
labour, to returns on capital – plus a corporation tax exemption for foreign
The ABI wants the 50% higher rate of income tax and National Insurance
charges on employment to be reversed “as soon as possible”.
“In addition, the changes to pension tax relief should also be reversed, to
help promote a savings culture by minimizing complexity and ensuring that there
are clearer principles underpinning the tax treatment of pensions.”
Making the tax regime more predictable is also a recommendation.
Let’s not forget that Brit Insurance ducked out of the UK’s tax system
earlier this year, when it moved its holding company to the Netherlands to
benefit from a more advantageous tax regime.
So will the government listen to Driver’s protestations? It looks as if we
will see and hear much more from her in the coming months as she takes on a more
public-facing role for UK insurers.
Reports suggest the chancellor may even be moved to take up some of the ABI’s
advice in the next Budget.
Whether other UK insurers follow Brit off our shores or the tax regime eases,
we should know more come autumn’s pre-Budget report.
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