GFIA Response to Action 4 of the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS)Release Date: 10/16/2013 Staff Reference: Janice Hilchie
16th October 2013
Affiliate Reinsurance Does Not Present Base Erosion Concerns Which May be Present in Other Cross-border Transactions
The Global Federation of Insurance Associations (GFIA) supports the objective of the OECD and governments to combat tax evasion. However, we are concerned that legitimate business activities could be inadvertently negatively impacted under the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS). Our comments are focused on ACTION 4 - Limit base erosion via interest deductions and other financial payments, and, in particular, on the brief reference to “captive and other insurance arrangements” in that section. Any action to address tax-driven captive insurance arrangements must be carefully targeted to avoid penalizing commercially driven affiliate reinsurance.
Unless insurance business models are fully understood and taken into account in the BEPS process, there is a risk that the insurance industry may be inadvertently impacted. In addition to the comments below, we would welcome the opportunity to help the OECD understand the operations of the insurance industry, particularly around the use of capital, risk management and reinsurance.