CEA calls for EC tax proposals to differentiate between insurers and banks
11 October 2010
The CEA urges the Commission to take full and fair account in its proposals and forthcoming impact assessment of the distinct insurance business model and of the positive role of insurers in the economy, both since and during the crisis.
The CEA, the European insurance and reinsurance federation, believes that today’s Communication from the European Commission on Taxation of the Financial Sector fails to differentiate appropriately between different types of financial institutions.
The EC Communication recommends a Financial Activities Tax (FAT) at EU level, which would target the profits and remunerations of financial sector companies. The Communication also supports the idea of a Financial Transactions Tax (FTT) at global level.
“A primary aim of the Commission in proposing this taxation is to ensure that institutions that bore responsibility for the economic crisis contribute to fiscal consolidation in its aftermath. The insurance industry was not the source of the crisis and should therefore not be included in these proposals,” said Michaela Koller, director general of the CEA.
Insurers would also be unlikely to be the recipients of any future government interventions due to their stronger capacity to withstand stress conditions and the existence of orderly wind-up procedures in the insurance market. “Any kind of cross-subsidisation of other financial sectors is inappropriate and could create moral hazard,” added Koller.
The Commission Communication also states that one of its policy goals is to “improve the stability of the financial sector by dissuading it from carrying out certain risky activities”. It must be remembered that insurers, with their stable, up-front and long-term funding, have a fundamentally different business model to that of banks. Core insurance activities do not generate systemic stress and, indeed, insurance plays a stabilising role in the economy.
“Insurers’ contribution to a stable and successful European economy must not be inadvertently harmed by the inappropriate read-across of regulation aimed at other sections of the financial services sector,” insisted Koller.
The EC Communication suggests that the financial sector could also make “a fairer and more substantial contribution to government finances” on the grounds that most financial services are exempt from VAT in the EU. The CEA believes that this argument fails to take account of the alternative indirect taxation applied to the insurance sector to compensate for the VAT exemption.
© CEA - Comité Européen des Assurances
