International Tax and Public Finance

, Volume 20, Issue 5, pp 867–883 | Cite as

A proposal to apply the Kiwi-VAT to insurance services in the European Union

  • Sijbren Cnossen
Policy Watch


In the spirit of the European Commission’s call for a simpler, more robust and efficient VAT system, this article proposes to integrate exempt insurance services into the European VAT, and to abolish the discriminatory, excise-type insurance premium taxes levied by the various Member States. The current VAT exemption (no taxation of insurance services and no credit for the VAT on inputs) is administratively complex and economically distortionary. Instead, the value added of property and casualty insurance companies can be taxed on a transactions basis by applying the VAT to insurance premiums (creditable by VAT-liable businesses) and allowing a presumptive tax credit for the VAT imputable to payouts (plus a credit for the actual VAT on purchases). The presumptive tax credit should be taxed at the level of business recipients, but individuals would receive the VAT along with indemnity payments without having to file a return. Exceptionally, the tax-credit VAT would not be applied to life and health insurance premiums, but insurers would be taxed on an accounts basis on the sum of wages and business cash flow.


VAT Insurance premium tax Insurance European Union 

JEL Classification

H21 H25 



The author is grateful for the helpful comments received from Bernd Genser, Rita de la Feria, Stephen Matthews, and two anonymous referees.


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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.CPB Netherlands Bureau for Economic Policy AnalysisThe HagueThe Netherlands

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