More indirect taxation to come in 2013 experts warn

“Since the start of the financial crisis we have been warning insurers that European governments would increase their focus on indirect taxation to fund budget shortfalls,” said Fiscal Reps chief executive Mike Stalley. “Now the promised changes are upon us and in the coming year we will see significant insurance premium tax and parafiscal tax changes right across the continent.”

He went on, “From January 1 onwards, a swathe of countries will raise indirect tax rates, introduce new taxes or revise laws to increase the size of the tax base. And with these changes comes clear evidence of a tightening up of tax revenue collection measures. It is imperative for insurance businesses to keep pace with these developments to maintain tax compliance.”

Joseph Finbow, client manager at FiscalReps, explained some of the changes expected in 2013: “The Netherlands and Finland will be first to push up Insurance Premium Tax (IPT) rates in the New Year. Meanwhile, Greece is increasing the rate of its Motor Guarantee Fund. Anticipated new taxes in 2013 include Denmark’s introduction of IPT in January to replace stamp duty on premiums, a possible flood levy in the UK and the potential introduction by Hungary of IPT to replace its Fire Brigade Tax. In addition, we are seeing countries like Germany, Spain and Iceland rewriting their tax legislation. This is a lot of change for insurers to contend with.”

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Mr Stalley told IPN: “If you are writing risks through a global insurance programme, premium tax compliance will always be an issue that needs due consideration. The recent changes in tax law suggests that premium taxes are now subject to much more scrutiny by tax officials and the area of international programmes, and especially premium allocation, is an area that, to date, has not been subject to a huge amount of investigation.”

He pointed out the changes in legislation can have a number of different implications for global insurance programmes. For example, in Spain especially, some regions are now exercising powers that they have had for a number of years but never used before, with the intention of collecting premium taxes directly from the tax payers rather than via the central tax office in Madrid. Whilst this does not impact the tax cost, he said, it adds an additional administrative burden, which the tax payer must be aware of and must comply with.

Another example is Germany, where the legislative review was primarily aimed at simplifying the collection of IPT so that authorities can maximise their tax revenue but keep their costs down, and also encourage taxpayers to become more compliant. “We have also become aware, however, that the German tax authorities are investing more resources into tax collection, ensuring that all taxpayers are fully accountable for premium taxes that they have collected,” said Mr Stalley.

Looking further ahead, things are not likely to get any better, said Mr Finbow: “These developments are not the end of the story – even more tax changes are likely in the months and years ahead, as cash-strapped governments go in search of fresh revenue sources.”

Looking at Eastern Europe, for example, the Eastern European Accession countries were the ones that tended to not have premium taxes. However, this has begun to change, with Bulgaria introducing a tax in 2011, Hungary planning to follow suit in 2013 and the Czech Republic likely to do so by 2014. “If the trend continues, we would expect the likes of the Baltic states (Estonia, Latvia & Lithuania), together with Poland, Slovakia & Romania, to introduce a premium tax regime in the coming years,” said Mr Stalley.