|
|
|
 |
 |
A proposal in President Barack Obama’s FY 2014 budget seeks to deny a tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers. The proposal closely resembles legislation introduced in previous Congresses by US Representative Richard Neal (D-MA) and Senator Robert Menendez (D-NJ) that would drastically raise insurance rates across the country. The President’s budget proposal and the Neal-Menendez legislation would impose an unnecessary and costly tariff on the companies that help spread insurance risks globally. This ability to spread risk has been especially beneficial for consumers and businesses in areas subject to hurricanes, earthquakes, crop failures and other forms of disaster.
More than 100 independent experts, state government officials, business owners, and associations have publicly filed opposition letters to these tax proposals. Additionally, the Brattle Group, an economic research firm, has published a study pointing out the potential economic consequences of the Neal-Menendez legislation.
“Roundup the usual suspects;” here we go again. No, it’s not an unsolved murder in wartime Casablanca, simply the latest skirmish in the ongoing dispute over whether companies that write reinsurance in the U.S. market are using tax havens to avoid paying a fair share of the taxes they would otherwise owe on the premiums they earn.
Buried on page 187 of President Obama’s 2014 budget lies a $6.2 billion tax hike with potentially disastrous consequences. While the language used to describe the new tax—“disallow the deduction for non-taxed reinsurance premiums paid to foreign affiliates”—will evoke more drowsiness than Tea Party rage, it’s still a problem. The tax will make insurance vastly more expensive, destroy jobs, and, quite possibly, start a trade war.
Buried deep within President Barack Obama’s FY2014 budget released this week is a provision that calls for changing the tax treatment of reinsurance transactions here in Bermuda. The administration wants to “deny an insurance company a deduction for premiums and other amounts paid to affiliated foreign companies with respect to reinsurance of property and casualty risks to the extent that the foreign reinsurer (or its parent company) is not subject to US income tax with respect to the premiums received.”
The Obama administration has again revived its proposal to reduce the tax benefits foreign insurers receive by ceding U.S. property and casualty premiums to their foreign affiliates. The provision, contained in President Obama’s budget for 2014 unveiled Wednesday, prompted a flurry of responses from domestic insurers who support the legislation—led by William R. Berkley, CEO W.R. Berkley Corp.—and challengers of the proposal.
Beautiful river and coastal areas are often expensive places to live and few can afford high-priced "beachfront" property for their primary residence or cottage. Wind damage and flooding are obvious risks and the cost of insurance against those risks is far higher than elsewhere. We extend our best wishes to those lucky people who can afford locating in such desirable areas.But along comes Congress considering a tax for fixing the inevitable wind and flood damage to pricey beachfront properties.
Post a Comment