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Dáil Éireann Debate, Tuesday - 16 June 2020

Tuesday, 16 June 2020

Questions (125)

Gerald Nash

Question:

125. Deputy Ged Nash asked the Minister for Finance the revenue that would be raised from an insurance windfall tax on the profits of insurance companies levied at a rate at each percentage point from 1% to 5%, respectively; and if he will make a statement on the matter. [11466/20]

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Written answers

It is not possible to provide estimated revenue yields for the policy measure proposed by the Deputy as the system of sectoral classification of businesses by NACE code does not provide sufficient accuracy for the specific profits on insurance companies to be separately identified from tax returns, and therefore for a robust estimate to be made.

Notwithstanding this, for the reasons set out below I do not believe the introduction of an insurance windfall tax on the profits of insurance companies, as suggested by the Deputy, would be appropriate.

Ireland’s corporation tax regime is a core part of our economic policy mix and is a long-standing anchor of our offering on foreign direct investment.  The 12.5% rate, which applies to a broad base, is internationally competitive and is notable for its long term stability.  Certainty, transparency and a commitment to open engagement with stakeholders are cornerstones of the corporate tax regime.

The proposed introduction of a windfall tax on the profits of insurance companies would not be consistent with our long-standing commitment to a sustainable and stable corporation tax system.  It should also be noted that State aid implications would need to be considered when proposing any change which would provide a varied rate of tax to any targeted cohort of taxpayers.

Furthermore, it is my view that any decision taken on taxing the profits of an important sector of the economy, such as the insurance sector, must be considered in the context of the wider impact that it could have on the economy and consumers.  In this respect, I believe that such a measure could be counterproductive as it could lead to increases in the cost of premiums for individuals and businesses as it is likely that the cost of the tax would be passed onto customers.  In addition, such a measure could act as a barrier to potential new entrants in the market, thereby reducing competition in the market.

However, notwithstanding the above, I believe that insurers need to do more for their customers, particularly in the context of the considerable profits announced earlier this year.  I believe that they should respond to the important reforms currently under way and that they should reduce premiums accordingly and widen their risk horizons for certain sectors of the economy such as the leisure, tourism and not-for-profit sectors.  In that respect, the continued implementation of the recommendations of the Cost of Insurance Working Group’s two reports remain very relevant as a means to increase both insurance affordability and availability. Of particular importance is the work of the Personal Injuries Guidelines Committee, which was formally established in April and is due to present its draft guidelines to the Judicial Council by the end of October. I expect that more consistent award levels for personal injuries will help to reduce legal costs over time as there will be less incentive to litigate. In addition, I believe that insurers recognise the need to reflect any savings that result from a reduction in award levels in lower prices and a broader risk appetite.

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