The UK government has defended a third increase in the standard rate of insurance premium tax in under two years, but economists told lawmakers that if the tax is being used as a substitute for VAT, the new 12 percent rate cannot be justified.
“Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT,” Chancellor of the Exchequer Philip Hammond said as he delivered his autumn statement. “In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10 percent currently to 12 percent from next June…”
“The government clearly sees insurance premium tax as a cash cow,” said the tax faculty of the Institute of Chartered Accountants in England and Wales. The faculty pointed out that while the government described the IPT as a tax on insurers, it is “collected by insurers on behalf of [the] government from policy-holders.”
Read more: My news story for Tax Analysts, 29 November (paywall).