As the vaccine rollout hopefully helps the health crisis to abate, government attention will quickly turn to addressing the economic situation. The Insurance and Long-Term Savings Industry makes a significant contribution to the UK economy. Employing over 300,000 individuals around the UK, the industry manages investments of over £1.7trillion and today we publish a report that indicates the industry paid £16 billion in taxes during 2019/20.
How much of government revenues is the insurance industry responsible for, and which taxes make up the majority of the contribution? To provide greater insight, we commissioned PwC to prepare a Total Tax Contribution (TTC) report, to determine in a more granular manner the relationship between taxes borne and taxes collected, and whether these have changed over time.
What is striking is that since the last ABI TTC report (2014), the total tax contribution has increased by over 50% and the ratio of tax contribution to premiums has increased from 12.9% to 21.9% of total revenues.
Of course, some taxes are more visible than others, and have different impacts. The ABI has been pointing out for several years now – and the Social Market Foundation has done some detailed research into this - that raising Insurance Premium Tax again and again disproportionately affects the less advantaged in society, by disincentivising those who most need to protect themselves from doing so. Pensions tax relief is designed to incentivise workers to build a buffer of protection to support them in retirement – again, an area where the least advantaged have the greatest need, but where tax relief is lowest.
I encourage you to read through the TTC report and continue to engage with us on the tax agenda, as we emerge from the current difficult environment. The insurance industry has a crucial role to play in the reshaping of the economy and a competitive tax system is important to the industry.