Taxation Flashcards
What is the purpose of a tax system?
- Rase tax for service needed by citizens
- Promote economic goals
- Social goals
- Promote prudent financial behaviour
What are the 3 desirable traits of a tax system
Vertical equity, Neutrality (horizontal equity) and simplicity
Vertical equity
Tax payer must contribute there fair share
Neutrality / horizontal equity
Tax economically equivalent entities, products and services.
Simplicity in the tax system
Cheap and easy to collect and is not easy for people to avoid
What are the 2 types of tax systems?
Tax baces, Tax exemptions and deductions,
Tax bases
Every systems must begin with a tax base usally income tax, consumption tax and wealth tax. The broader the better
What are exemption deductions and credits used by regulators to do?
Modify the system
How can tax be used as a tool?
Promote or discourage behaviours such as spending and investing
How is lie insurance taxed?
Premiums, living benefits, death proceeds from life insurance, taxing the profits of insurance companies
Is there tax relief available for premiums in Ireland?
No, but other countries do such as Germany, Japan and Belgium.
Why doesn’t the Irish government offer tax breaks on life insurance premiums?
Because people dying is no longer as big of a social imperative as it once was. They would rather see people invest in pensions or long term care.
What are living benefits
Payouts from a pension
Are living benefits taxed and why?
No, because they are not investment income, they are repayments from overpaying for your premium
How annuity payouts taxed?
They a taxed when they payout in terms of PAYE and USC. They are not texted in the way in
What tax do you pay on an ARF?
PRSI and USC
Do you pay tax on death proceeds from life insurance
No, if it’s under a certain amount (progressive) and is not paid into an estate
What tax is paid on an ARF when you die?
Money goes back to family, with 30 % tax
Who is responsible to pay the premium on taxes insured or insurer?
Insurer
Why are insurance companies hard to tax?
Their profits are hard to calculate because insurance contracts are long.
What is tax harmonisation
Where there would be universal tax laws across the EU.
What would be the impact of increasing tax on insurance in Ireland due to tax harmonisation?
- Inefficient allocation of the worlds insurance capacity
- Cause insurers to leave Ireland
- Encourage consumers to seek insurance from suppliers in lower tax jurisdictions
- Encourage tax arbitration
What are the 3 mechanisms of regulation?
Legislation, Judicial, Execuitive
Legislative
The rule of society. They give clear guidance on how to be enforced
Where do we see legislation in insurance?
Licencing, Brokers and agents, approval of insurance rates
Judicial
The enforcement of the legislation
What is the judicial used for in insurance?
Disputes against the insurer and insured
Executive
Self-regulation through administrative officials who oversee the industry
What is an example of executive regulation
Not using genetic test in life insurance
What is quasi-legislative power
Executive regulation through broad administration
What principle does the EU operate under for insurance legislation
Each state is free to regulate as it wished subject to full implementation
Pan European pension product
A private pension that can be transferred across any EU county and any job
Insurance distribution directive
An EU wide consumer protection code
Pasporting
Selling insurance products across borders.
What are the aims of EU directives
Create a single market
If you want to write insurance across borders what do you need?
Permission from the host country
