More modern tax rules to be developed
The country’s life insurance industry has a few months to get together with officials and sort through major changes to how the industry is taxed.
Wednesday, September 27th 2006, 7:10AM
by Rob Hosking
The Inland Revenue yesterday released a discussion document on changes to how life insurance is taxed. The aim - which officials admit is a best case scenario, is to have new rules in place for 1 October next year, when changes to the investment tax rules take effect.
Life insurance was to have been dealt with in 2008: however strong lobbying form the Investment Savings and Insurance Association, to the effect that a delay would further disadvantage some life insurance products, has brought the issue forward.
Officials have put up two options for change – but emphasise that “other options that may emerge from discussion will also be considered.”
The overall aim of a new set of rules would be to “ensure that risk business is taxed on a basis that is not inconsistent with similar businesses – for example, general insurers” as well as produce a tax regime which fits with the portfolio investment entity (PIE) rules currently before a parliamentary select committee.
The IRD has put forward two options: one is taxing life companies and their policyholders on a proxy basis similar to the present regime.
The other option is to integrate with new financial accounting rules under the IFRS regime.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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