by David Chaplin
According to ISI chief, Vance Arkinstall, there are “compelling reasons” why the insurance tax changes should not come into force before January 2011 at the earliest.
“We've always held the view that January 2011 was a sensible starting date for the new insurance tax rules but now we are more certain than ever of that position,” Arkinstall said.
Firstly, he said the current economic turmoil was already hurting insurance providers which would be compounded by the onerous tax changes, which are expected to add 15-25% to insurers' costs.
Arkinstall said the economy should stabilise by early 2011 allowing providers to more easily absorb the additional costs of tax reform.
“As well there are significant technical issues with the bill as it stands,” he said. “The Institute of Chartered Accountants have told the Finance and Expenditure Committee that they couldn't apply the law with any confidence.”
Arkinstall said the industry has proposed a redrafting of the insurance tax proposals to clarify outstanding issues, a process that could take over six months.
“If that's the case it should be able to make the November tax bill this year,” he said. “So by the end of this year the industry can begin planning implementation.”
Arkinstall said ISI members have indicated it would take between six to 12 months to implement the tax changes into their businesses and IT systems, suggesting all insurers would not be ready until the end of next year.
“We're not just working to defer the bill. The industry has accepted the tax changes are necessary,” Arkinstall said.
Originally, the new insurance tax rules, included in the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, were due to take effect on April 1 this year but after successful industry lobbying, Revenue Minister, Peter Dunne, agreed to a postponement.
"For the reform of the rules on taxing the life insurance business, I have recommended that the application date of the new rules be deferred until a date to be determined following further discussion with the industry,” Dunne said in a statement last week.
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