Insurance premium tax
A tax levied on the premium rather than on profit, which raises the cost of cover regardless of the insurer's profitability and depresses take-up.
June 1, 2017: the UK insurance premium tax rises to 12%, double its 2015 rate, after three successive increases. Insurance premium tax is an indirect tax levied on the amount of the premium, borne by the policyholder and collected by the insurer. Its rate varies by line and by country, and life insurance is usually exempt. Two properties distinguish it from other levies. It falls on turnover rather than profit, so it is due whether the year is profitable or not. And unlike value added tax, it is generally not recoverable, which makes it a sticky cost for insured businesses. Its economic incidence is regressive in terms of cover: each point of tax raises the premium by as much and prices out the households or small businesses closest to the point of giving up. The tax thereby widens the very protection gap public authorities deplore elsewhere. Finally, it is due in the state where the risk is situated. For international programs, determining the location of the risk therefore becomes a compliance subject in its own right.
In the United Kingdom, the standard rate of insurance premium tax rose from six percent in 2015 to twelve percent on June 1, 2017, through three successive increases set in the Finance Acts.
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