A proposal to apply the Kiwi-VAT to insurance services in the European Union
- Sijbren Cnossen
- … show all 1 hide
Purchase on Springer.com
$39.95 / €34.95 / £29.95*
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.
In the spirit of the European Commission’s call for a simpler, more robust and efficient VAT system, this article proposes to integrate exempt insurance services into the European VAT, and to abolish the discriminatory, excise-type insurance premium taxes levied by the various Member States. The current VAT exemption (no taxation of insurance services and no credit for the VAT on inputs) is administratively complex and economically distortionary. Instead, the value added of property and casualty insurance companies can be taxed on a transactions basis by applying the VAT to insurance premiums (creditable by VAT-liable businesses) and allowing a presumptive tax credit for the VAT imputable to payouts (plus a credit for the actual VAT on purchases). The presumptive tax credit should be taxed at the level of business recipients, but individuals would receive the VAT along with indemnity payments without having to file a return. Exceptionally, the tax-credit VAT would not be applied to life and health insurance premiums, but insurers would be taxed on an accounts basis on the sum of wages and business cash flow.
- Auerbach, A. (2008). The choice between income and consumption taxes: a primer. In A. Auerbach & D. Shaviro (Eds.), Institutional foundations of public finance: economic and legal perspectives (pp. 13–46). Cambridge: Harvard University Press.
- Auerbach, A. J., & Gordon, R. H. (2002). Taxation of financial services under a VAT. American Economic Review, 92(2), 411–416. CrossRef
- Australian Tax Office (undated). GST and general insurance. Available on the Internet.
- Barham, V., Poddar, S. N., & Whalley, J. (1987). The tax treatment of insurance under a consumption type, destination basis VAT. National Tax Journal, 40(2), 171–182.
- Cnossen, S. (2010a). A VAT primer for lawyers, economists, and accountants. In Tax Analysts: The VAT reader: what a federal consumption tax would mean for America (pp. 23–51).
- Cnossen, S. (2010b). VAT coordination in common markets and federations: lessons from European experience. Tax Law Review, 63(3), 583–622.
- Cnossen, S. (2011). A proposal to improve the VAT treatment of housing in the European Union. Fiscal Studies, 32(4), 455–481. CrossRef
- Council Directive (2006). Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. Official Journal of the European Union, I, L347/1.
- De la Feria, R. (2007). The EU VAT treatment of insurance and financial services (again) under review. EC Tax Review, 2, 74–89.
- De la Feria, R., & Lockwood, B. (2010). Opting for opting-in? An evaluation of the European Commission’s proposals for reforming VAT on financial services. Fiscal Studies, 31(2), 171–202. CrossRef
- Ebrill, L., Keen, M., Bodin, J.-P., & Summers, V. (2001). The modern VAT. Washington: International Monetary Fund.
- European Commission (2007a). Proposal for a Council Regulation laying down implementing measures for Directive 2006/112/EC on the common system of value added tax, as regards the treatment of insurance and financial services. COM(2007) 746 final (28 November), Brussels.
- European Commission (2007b). Proposal for a Council Regulation amending Directive 2006/112/EC on the common system of value added tax, as regards the treatment of insurance and financial services. SEC(2007), 1555 (28 November), Brussels.
- European Commission (2007c). Draft regulation: financial and insurance services of working party, No 1: harmonisation of turnover taxes. TAXUD/2146/07 (13 July), Brussels.
- European Commission (2008). Financial and insurance services, background paper requested by the council presidency, directorate general taxation and customs union. TAXUD/2414/08 (March), Brussels.
- European Commission (2010a). Green Paper on the future of VAT: towards a simpler, more robust and efficient VAT system. SEC(2010) 695 final, Brussels.
- European Commission (2010b). Commission Staff Working document, accompanying document to the Green Paper on the future of VAT: towards a simpler, more robust and efficient VAT system. SEC(2010), 1455 final, Brussels.
- European Commission (2011a). Summary report of the outcome of the Public consultation on the Green Paper on the future of VAT: towards a simpler, more robust and efficient VAT system, Brussels, Directorate-General Taxation and Customs. TAXUD.c.1(2011)1417007 (2 December), Brussels.
- European Commission (2011b). A retrospective evaluation of elements of the EU VAT system. Final report, TAXUD/2010/DE/328 (1 December), Brussels.
- European Commission (2011c). Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the future of VAT: towards a simpler, more robust and efficient VAT system tailored to the single market. COM(2011) 851 final, Brussels.
- Huizinga, H. (2002). Financial services VAT: VAT in Europe? Economic Policy, October, 498–534.
- OECD (2011). Revenue statistics 1965–2010. Paris: OECD Publishing. CrossRef
- Schenk, A., & Oldman, O. (2007). Value-added tax: a comparative approach. Cambridge: Cambridge University Press. CrossRef
- Wirth, D. (2011). International comparison of insurance taxation: financial services, 2011 Ed. PriceWaterhouseCoopers: available on the Internet.
- A proposal to apply the Kiwi-VAT to insurance services in the European Union
International Tax and Public Finance
Volume 20, Issue 5 , pp 867-883
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Insurance premium tax
- European Union
- Industry Sectors
- Sijbren Cnossen (1)
- Author Affiliations
- 1. CPB Netherlands Bureau for Economic Policy Analysis, P.O. Box 80510, 2508 GM, The Hague, The Netherlands