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.
Insurance premium tax is an indirect tax levied on the amount of the premium, borne by the policyholder and collected by the insurer, whose rate varies by line and by country and from which life assurance 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 it is generally not recoverable the way value added tax is, 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, widening the very protection gap public authorities deplore elsewhere. Its location follows a precise rule, the tax being due in the state where the risk is situated, which makes determining the location of the risk a compliance subject in its own right for international programs.
In the United Kingdom, the standard rate of insurance premium tax rose from six per cent in 2015 to twelve per cent on 1 June 2017, through three successive increases set in the Finance Acts.
IPT, insurance premium tax, taxe sur les conventions d'assurance, TCA