Insurers Say They'll Leave U.K. Base If Tax System Not Fixed

NU Online News Service, Sept. 15, 3:24 p.m. EDT

A large majority of insurance executives in the United Kingdom believe that if the government does not overhaul the tax system there will be a drop in the number of insurers based there, a trade group survey finds.

The Association of British Insurers said a survey of 75 member executives found that 80 percent feel the number of U.K.-domiciled insurance companies will fall if the tax system remains unchanged over the next five years. Fifty-two percent said they believe the number would fall slightly, while 29 percent said the fall would be dramatic.

In addition, the survey said that almost two-thirds of senior management are tempted to move abroad because of the nation's current personal tax system.

When asked how competitive they felt the corporate tax system is in the United Kingdom, 71 percent said it is uncompetitive.

The release of the survey results came with the publication of the ABI's report titled "UK Competitiveness: the way forward for insurance."

ABI said that among some of the report's suggestions are:

o Introduction of a corporate tax exemption for those with branches abroad to encourage companies to keep or set up their headquarters in the United Kingdom.

o Reform controlled foreign companies' rules to recognize the importance of capital to insurance and reinsurance businesses by moving the bias away from returns from labor and toward returns from capital.

o Reduction of corporate tax when the fiscal conditions allow.

o Require any tax changes in response to regulatory reform to result in a stable and sustainable system. The changes should also not endanger the United Kingdom's competitiveness with the European Union.

o The tax system should become stable and predictable.

o The link between competitiveness and personal tax needs to be recognized. The higher rate of income tax and restriction of tax relief on the pension contributions of high earners reduces the attractiveness of the United Kingdom as a place to work for company executives.

"The recession cannot be allowed to mask the challenge, but also the opportunity, the [United Kingdom] faces over competitiveness. Getting it right today could reap rich rewards tomorrow," said Stephen Haddrill, ABI's director general, in a statement.

"The [United Kingdom] cannot afford to wait for a return to economic health to act," he continued. "Our proposals will make sure that we can build upon an already strong U.K. insurance industry--one that has come through this crisis in robust shape and is a major international player."

Copies of the ABI's 24-page report are available at www.abi.org.uk.