Report from AIRMIC: The Global Pain of Tax on Premiums

Cargill is the second-largest private company in the US and operates in 66 countries. David Ketley, Cargill’s UK risk manager, explained how even the best of best efforts result in less-than-perfect compliance.

Every country has rules about what tax on premium is due, who has to pay it, what filings are required and when they are due. These taxes vary by coverage type and business class, so it’s a matrix on top of a matrix. Frequently it’s the underwriters who pay on behalf of the client but sometimes it’s the duty of the broker and in some cases the client who has to pay.

Advisen carries data from a third party service provider on the rules and regulations in 165 of the world’s 195 countries, including how taxes on premiums are to be paid. David Ketley said it’s hard to keep up and cited how Advisen Front Page News alerted him to a change in Australia’s rules. But this panel discussion highlighted that while the tracking of these rules is tough, it is far from the whole of the challenge.

For example, while the tax liability is ultimately paid by the risk manager, as AIG said – it’s part of their expense ratio, getting an invoice or receipt is next to impossible and ensuring that the amount has actually been paid is also difficult – this is quite unpopular with corporate compliance officers.

Allocation by risk managers of these taxes is also difficult – the consensus among the audience was that it was more important to regulators to see a consistent approach over many years than to get every allocation correct down to the last penny.

Cargill was joined on the panel discussion by Mike Stalley, Founder & CEO of Fiscal Reps which effectively administers the tax calculations and filings and payment on behalf of insurers in EU countries, another in a never-ending series of cottage industries in the global commercial insurance market.

When the panellists ended the session by saying that tax on broker fees was another massive challenge, we left the session informed, but perhaps depressed.