Present regime forces companies to move their headquarters abroad, say chief executives
More than half of insurance bosses believe the UK’s punitive tax regime will force more firms to move abroad, an ABI survey has revealed.
ABI chief executive Stephen Haddrill is now calling for a shake-up in the way insurers are taxed to boost competitiveness against foreign firms.
He said tax changes would also help the UK to attract a much larger share of the wholesale and reinsurance market. It currently holds 10% of global reinsurance capital.
His call follows the decision of several insurers to move their headquarters abroad, including Hiscox and Kiln to Bermuda, and Brit to the Netherlands.
Haddrill commented: “The recession cannot be allowed to mask the challenge, but also the opportunity, that the UK also faces over competitiveness.
“Getting it right today could reap rich rewards tomorrow,” he added. “The UK cannot afford to wait for a return to economic health to act. Our proposals will make sure that we can build upon an already strong insurance industry – one that has come through the crisis in robust shape and is a major international player.”
In the survey of 75 chief executives and financial directors, 71% said that they had real concerns about the UK tax system, believing it to be “fairly uncompetitive”. Fifty-two per cent said they believed more companies would move abroad.
And almost two-thirds said punitive personal taxes here tempted them to move abroad too.
The ABI proposals, launched on Tuesday in a paper called ‘UK Competitiveness, the way forward for insurance’, include:
- Reducing corporation tax. In 2007, insurers paid nearly £10bn in tax revenues, the third highest corporation tax of any sector.
- Scrapping the 50% higher rate of income tax.
- Reforming foreign company rules that impose a greater tax burden on companies with fewer staff and lots of capital.
- A more lenient approach to the taxation of claims equalisation reserves.
- Introducing a corporate tax exemption for companies with branches abroad to encourage them to stay or set up in the UK.
The paper builds on the Insurance Industry Working Group report released in July this year, which outlined how the UK could remain competitive in the global marketplace. It was commissioned by the Chancellor, Alistair Darling.