GFIA Annual Report 2022-2023

TAXATION

On your marks

Get ready for implementation of the global minimum corporate tax rules

By Suzy Zozor, chair of the GFIA Taxation Working Group

As we reflect on the GFIA Taxation Working Group’s work over the last year, more than 50 jurisdictions are reported to be set on drafting regulations to implement Global Anti-Base Erosion (GloBE) rules (see explainers box) in their domestic tax legislation. What seemed an unachievable goal in the early days of the BEPS Action 1 works in 2015 is now taking shape, both swiftly and slowly depending on the viewpoint.

Explainers

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS, see explainers box) issued in December 2022 a draft GloBE Information Return and the outlines of ongoing discussions on tax certainty, safe harbours and penalty relief. The Inclusive Framework sought input from stakeholders and GFIA contributed by highlighting the need for simplifications and the adverse effect of designing a strenuous reporting requirement while seeking swift global implementation.

GFIA comment letter on December 2022 GloBE implementation package, 3 February 2023

Given the complexity of the GloBE rules, as pointed out by many stakeholders including GFIA and GFIA member associations, the Inclusive Framework issued in February 2023 Administrative Guidance intended to provide further clarifications. While GFIA acknowledged the Inclusive Framework’s extensive work and the consideration given to comments the industry had submitted in previous papers, GFIA felt it necessary to underscore where the additional guidance needed further fine-tuning.

GFIA letter to the OECD on Administrative Guidance on the GloBE Rules, 9 May 2023

As the implementation process is moving forward in many jurisdictions — and at a rather brisk pace in the EU and the UK — the Inclusive Framework continues to release additional material for clarification purposes on the implementation framework. An updated version of the GloBE Information Return, additional guidance and the outlines of the subject to tax (STTR, see explainers box) rule were released in late July 2023.

After thorough analysis of the GloBE rules package as it is being refined by the Inclusive Framework, most tax authorities are now considering the inclusion of a qualified domestic minimum top-up tax (QDMTT, see explainers box) in their domestic implementation package. Not only does such a QDMTT, if truly qualified, exempt multinational enterprises from full computation as set out in the GloBE Rules in the given jurisdiction, but it also enables the implementing state to collect tax from resident ultimate parent entities (UPEs, see explainers box).

The idea was to provide financial resources to states by fighting a tax race to the bottom. Well, lesson learned; there may very well be a 15% QDMTT in most implementing countries.

Pillar One slowly emerges

The OECD/G20 Inclusive Framework on BEPS agreed in October 2021 on a two-pillar solution to address global tax issues stemming from the digitalisation of the economy. Intended to reallocate part of the tax base in the jurisdiction where goods and services are consumed, Pillar One is designed for a phased implementation. According to its design and if all implementation conditions are met, as of 2025 Pillar One will provide for the reallocation of excess profits made by multinational enterprises that exceed the threshold of US€20bn turnover and 10% profitability. That threshold is set to be lowered pursuant to a peer-review.

The OECD released a progress report in November 2022 and various consultation documents in January and July 2023, thus shaping a clearer picture of the rules to come. GFIA welcomes the fact that insurance and reinsurance are now fully included in the Regulated Financial Services Exclusion, as the multinational enterprises in the industry are usually taxed where they operate.

“GFIA welcomes the fact that insurance and reinsurance are now fully included in the Regulated Financial Services Exclusion.”

Pillar One, Pillar Two … and the rest

GFIA’s Taxation Working Group has also covered issues other than the gigantic two-pillar OECD tax reform, such as the review of VAT rules in various jurisdictions that would have spill-over effects on insurance, the outcome of the peer review at OECD level on the Common Reporting Standard and the entry into force of International Financial Reporting Standard (IFRS) 17 on insurance contracts.

The draft public country-by-country reporting (CbCR) legislation in Australia also kept the Taxation Working Group busy, monitoring the parliamentary process of enactment as the first draft diverged completely from other existing public CbCR rules. GFIA thus highlighted what difficulties such differences in the local reporting requirement could entail for multinational enterprises operating in Australia.

GFIA comment on Australian Taxation Office Directive – public CbCR proposals, 17 July 2023

Suzy Zozor

France Assureurs

Suzy Zozor

France Assureurs

Print version

Awareness-raising campaigns

Insurers across Europe are involved in a broad range of awareness-raising campaigns. For instance, in Germany, risk-awareness campaigns are implemented jointly by state authorities, consumer protection organisations, the insurance industry, architects and other stakeholders. Their collaboration is built around a common goal: to raise awareness of the effects of climate change and natural hazards, of the benefits of loss prevention, and of best practices as regards natural catastrophe-resilient buildings. The high level of risk awareness in Germany is one of the reasons for the relatively low protection gap; indeed, the insurance penetration rate for natural perils such as storm or hail is more than 90%.
Most European insurance associations have initiatives to raise risk awareness, such as dedicated workshops, events and educational seminars, as well as frequent in-depth articles, themed newsletters, presentations and other publications.
Many French insurers have launched prevention campaigns and also support the campaigns of “Assurance Prévention”, an association founded by the French insurance association (France Assureurs). Assurance Prévention has produced numerous leaflets, infographics, quizzes, etc. to raise awareness of natural risks. Through its initiatives, it aims to develop a “culture of risk prevention” among students and teachers.

The Greek insurance association (HAIC) launched a digital awareness campaign — “Better to know than to think you know” — to provide consumers with useful information about private insurance and to set the record straight on some misperceptions. The campaign consists of six videos to educate the public about how private insurance works. Most of the videos emphasise the need for resilience in the face of natcat risks and the role of insurers in protecting private property. The videos are hosted on the interactive iknow-insurance.gr platform, which allows visitors to do a short quiz to test their knowledge of private insurance and then obtain additional information.
Insurance Sweden is currently working with its members on a common methodology for calculating carbon dioxide emissions during building repairs. The aim is to raise awareness of the impact on CO2 emissions of rebuilding after fire or water damage, and thus of the importance, from that perspective as well, of preventing such damages.
Insurance Sweden published a statistical report in October 2021 on how different municipalities and regions have been affected by damage caused by flooding, storm and fire.
Spotlighting the central role of municipalities in climate-change adaptation, Insurance Sweden ranks Swedish municipalities according to their adaptation work. The methodology is based on the European Commission’s Adaption Support Tool (2013). The ranking is released every other year, the June 2021 version is available here.
UNESPA, the Spanish insurance association, launched a dedicated website in October 2021 — “Naturalmente Protegidos” (Naturally protected) to explain how natcat insurance works in Spain. It focuses on 10 different risks (rain, flood, wind, drought, frost, hail, snow, earthquake, volcanic eruption and lightning) and details for each how insurance covers property, life, harvests and livestock. The website illustrates the success of the Spanish public-private natcat insurance model. It was jointly developed by private insurers (UNESPA), the Consorcio de Compensación de Seguros (CCS) government scheme and Agroseguro, Spain’s agricultural insurance system, and was launched within the framework of Estamos Seguros, UNESPA’s financial education campaign (running since 2016).
In collaboration with CEPYME, the Spanish confederation of SMEs, UNESPA launched in October 2020 “Prevenir para crecer” (Prevent to grow), a website with information on insurance for SMEs. The website highlights potential risks to which SMEs are exposed, including natcat-related risks, and provides advice on how to prevent them.
Insurance Ireland, the Irish insurance association, and a number of Irish insurers have launched consumer blogs and information repositories on their websites to share useful information with consumers about responsible and ESG investing.

Education

The European insurance industry works to increase financial literacy in relation to risk awareness, insurance protection and long-term savings:

The Croatian Insurance Bureau (HUO) launched a first educational project in 2009, “Financial literacy in the Republic of Croatia”, which was followed by a range of educational activities, often implemented jointly with independent insurers. One of these activities, “Safer Tomorrow”, was initiated in 2021, and aims to raise citizens’ awareness of the benefits of insurance. Within the framework of the project, HUO launched several videos and infographics, some of which specifically target young people.
The HUO organises a yearly competition for the best scientific paper, the best graduate thesis and the best undergraduate thesis in the field of insurance. HUO also publishes the “Croatian magazine for INSURANCE”, a scientific journal for professionals to advance good practice in the sector. Finally, some insurers in Croatia created a colouring book for children to promote financial literacy at a young age in a fun and simple way.
In Italy, the ANIA Academy, together with CeTIF (Research Centre on Technologies, Innovation and Finance of the Università Cattolica del Sacro Cuore), launched the second edition (2022) of the 2nd level master’s in insurance management to train professionals and enable them to respond to the challenges of the “new normal”.
ANIA is also collaborating with LUISS Business School to develop a major course in insurance management as part of its Executive Master in Financial Management.
Insurance Europe produces information for consumers as part of its “InsureWisely” financial education initiative. This includes one-pagers on different insurance topics, including how to limit the effects of natural catastrophes.
The French insurance association (France Assureurs) developed a series of educational booklets within the framework of EDUCFI (the French national strategy for economic, budgetary, and financial education), an initiative launched by the French Central Bank. These booklets help users to better understand how insurance works and what insurance products do and do not cover.
The Spanish insurance association (UNESPA) set up a financial education programme for schools, “El Riesgo y Yo” (“The Risk and I”). It involves 40 insurance undertakings and 164 volunteers and aims to give 2 500 teenage school students basic financial knowledge and insights into risk management.