“Give unto Caesar ….”
I am a strong advocate of utilising captives as a “risk ownership and a management” tool and have been known to be critical of ultimate beneficiary owners whose primary focus is fiscal arbitrage. I have in fact, in the past, labelled such strategies as myopic and short-lived because of the dynamic nature of fiscal legislation.
I continue to stand by this. We may view taxes as evil, but my view would continue to be that they are a necessary evil which is outweighed by the benefit they then provide in terms of the common good.
However, if some fiscal advantage accrues adjunct to other core benefits of a captive insurance solution then ultimate beneficiary owners would be well justified in reaping it, especially if it serves to build capacity and a more resilient risk-carrying captive. The ice-berg effect suggests that this would also ultimately be to the economic benefit of the host territories and not just the ultimate beneficiary owners.
To reap these benefits, one needs to have access to the necessary tools to measure the financial and fiscal impacts of different premium scenarios in the respective jurisdictions.
TMF Group’s Tax Calculator
There are various firms that provide international fiscal advice and/or localised treatment for insurance entities including captives. Besides the big 4 accounting firms, SOVOS (formerly Fiscal Reps) and TMF Group come to mind. I am sure there are also others operating within this niche.
The bigger fiscal players have carved out a niche specifically by building and maintaining a global data-base of fiscal and para-fiscal charges. This is not a simple task bearing in mind that tax or other parafiscal charges vary per country (or regionally within certain countries) and per class of business. Additionally, the method and timing of filing and payment may vary (e.g. tied to the insurance period, or upon receipt of premium or even subject to pre-payments). All of this makes forecasting and modelling more challenging for insurance companies, intermediaries or captives without the proper tools to provide accurate, detailed and current information in this respect.
TMF Group has developed an easy-to-use global insurance tax rate database and calculator which is available to its clients. Captive stakeholders modelling multi-national programmes can forecast tax liabilities on an array of insurance program scenarios when planning, say, their 3-year strategy and roadmap. Continuous updating of the tool guarantees stakeholders have access to the latest information at all times. This makes it a powerful tool for the risk management community.