The Tax Treatment of Financial Intermediation

Chia, Ngee-Choon; Whalley, John

doi:10.2307/2601218

Cited by 15 publications

(6 citation statements)

References 7 publications

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“…These results are in fact entirely consistent with the claims made in Jack (1999), and in Chia and Whalley (1999). If financial services require no real resources, then all prices for financial services should be proportional to the general price level, and no further tax needs to be collected from the financial sector.…”

Section: Equivalence Of a Labor Income Tax And A Vatsupporting

confidence: 78%

Taxation of Financial Services under a VAT

Auerbach

Gordon

2002

American Economic Review

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In simple economic models, it is relatively easy to describe how to impose a value-added tax at a uniform rate on all consumption goods, and to demonstrate that this tax is equivalent to a proportional labor income tax, plus a tax on existing assets. The equivalence involves little more than the national income identity relating the sources and uses of income. Once one attempts to incorporate the costs of financial intermediation, however, tax analysis becomes more complicated.In attempting to determine how a VAT should treat financial transactions, various authors have attempted to apply results from simpler models. Unfortunately, these results can lead to conflicting, ambiguous, and misleading prescriptions. In this paper, we argue that one needs to rely more on the fundamental objectives of a VAT to decide how it should treat financial transactions. Adopting this approach, we find that, in principle, the VAT should apply to resources devoted to financial transactions in the same manner that it does in other sectors. As discussed below, there are real problems, however, in implementing such a tax on the financial sector that we do not attempt to address in this paper.

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Section: Equivalence Of a Labor Income Tax And A Vatsupporting

confidence: 78%

Taxation of Financial Services under a VAT

Auerbach

Gordon

2002

American Economic Review

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“…The business tax rate for the insurance industry fell to 5% from January 1,2003 and the corporate income tax rate was unified to 25% from January 1, 2008.…”

Section: Comparative Analysis Of Tax Burden In Insurance Industrymentioning

confidence: 99%

The Research on the Insurance Industry’s Tax Burden in China under the Background of Change from Business Tax to VAT

Chen¹

2018

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The insurance industry plays a key role in the national economy and modern society. The tax policy has a wide range of influences on the development of the insurance industry and the tax burden is the core of tax policy, which is directly related to the business performance and the balance of the insurance market. This paper estimates insurance companies' effective tax rate of business tax and income tax by selecting insurance companies' financial statement data from 2008 to 2015. We can see that the effective tax rate of insurance industry is facing a heavy tax burden especially for property insurance industry. By studying these problems, we should pay more attention to the tax burden on the insurance companies in the implementation of value-added tax in order to achieve the basic goal about change from business tax to VAT that does not increase but decreases slightly the tax burden and eliminates the double taxation. We also should solve the problems and challenges of insurance companies, facing change from business Tax to VAT, thus promoting the development of the insurance industry and enhancing its international competitiveness. standard of social civilization, economic development and social governance. In 1980, there was only one in-service insurance company in China. And there were 165 insurance companies with premium income reaching 3.1 trillion yuan by the end of 2016. The size of the insurance market surpassed Germany, France and Britain with ranking third in the world in 2016. However, the density and depth of world average insurance in 2016 were 1.89 and 1.51 times that of China. Most insurance companies have large fluctuations in their profit margins, and the overall cost ratio for premium business is more than 80%. The industry's profit margin is relatively low. Tax policy is an important means of regulation and the most direct impact of policy changes is reflected in the tax burden. A reasonable tax burden not only promotes the development of insurance companies, but also promotes the development of the country's economy. This article analyzes the tax burden of the insurance industry when the Chinese insurance industry begins to be collected in VAT, and combines the problems faced by insurance companies to provide ideas for the further expansion of China's insurance industry taxation policy, so that the reform of the insurance's business tax system is more in line with the needs of the national economy and the development of the industry, and can improve the level of development of the insurance industry and the level of international competitiveness. The greatest contribution of this paper is to divide insurance companies into different scales and operating characteristics to measure and compare the tax burden. The article data is true and reliable. However, this article does not carry out empirical regression. The article is organized as follows: firstly, sort out domestic and foreign literature from the aspects of the tax system, the tax burden measurement, the impact of tax burden and the impa...

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“…In this perspective, banks that hold a large amount of liquid assets are likely to perform less than banks investing in riskier assets (Goddard et al, 2013;Molyneux and Thornton, 1992). Apart from the impact of capital and of liquid assets holding on profitability, the literature focuses on other determinants of profitability such as market concentration (Bourke, 1989;Dietrich and Wanzenried, 2014;Molyneux and Thornton, 1992), cash and bank deposits (Bourke, 1989;Molyneux and Thornton, 1992), credit risks and loan loss provisions (Dietrich and Wanzenried, 2014;García-Herrero et al, 2009), tax variables (Albertazzi and Gambacorta, 2009;Chia and Whalley, 1999) and non-performing loans (García-Herrero et al, 2009). The impact of macroeconomic variables on profitability has also been assessed by many papers, for instance the impact of GDP growth rates (Bordeleau and Graham, 2010;Dietrich and Wanzenried, 2014), that of inflation (Bordeleau and Graham, 2010;Bourke, 1989;Dietrich and Wanzenried, 2014) and that of monetary policy (Borio et al, 2017).…”

Section: Introductionmentioning

confidence: 99%