An Empirical Research Regarding the Link between Tax Insurance, Level of Living Standards and Development of the Insurance Branch

Abstract

The goal of the paper is to realize an empirical research regarding the link between tax insurance, level of living standards and development of insurance branch. Current financial and economic crisis accentuates high unemployment, fulminate bankruptcy of many firms and impossibility of quantification of negative economic and social consequences. That's why, fiscal specialists believe that taxation of insurance represents an important issue both for insurers and the European or/and national supervisory body of insurance market, and also for individuals or/and legal entities. EU attempts to harmonize first the national legislations regarding the taxation and then those relating to insurance, aiming to ensure the specific solvency of insurance companies. Estimating that, the significance of fiscal considerations in the decision to subscribe insurances contracts, different European countries, including Romania, have tried and managed through its fiscal laws to apply different ways for fiscal deductibility of insurance expenses. The taxation of insurance should be regarded and analyzed both from the perspective of gross premiums subscribed and received by insurance companies and services from the insurer. Insurers ‘benefits may take various forms (daily allowances, sums insured in case of life or death, rents, amounts provided for single-premium policy, those with capitalization) depending on the policy and concluded the nature of risk covered. Taxation of these benefits are achieved with the principles and logic of tax (a tax or insurance premiums or benefits), but depends on the binding and/or voluntary policy. Legislation regarding taxation is changing frequently. Besides this, we assist now at several changes, both in legislation regarding the accounting and insurance domain. To avoid failure of these entities, the European Commission, through its agencies, helped to create the legal framework to ensure the solvency of insurance companies. The implementation of IAS/IFRS in our country, for insurance companies, helped supervisors and local decision makers to use XRL in order to disclosure the accounting information's in financial statements understandable for the investor. Between taxation – legislation – accounting – solvency exist a real connection, which positive evolution will help the standard of live. In order to do so I performed an analysis on a sample of 32 countries and a horizon of 6 years (2005, 2007, 2008, 2009, 2010 and 2011). During our work, we tested 4 linear regression models (life gross written premiums, non-life gross written premiums, number of insurance companies and number of employees in the insurance sector). The results will confirm the existing link between development level of countries and insurance, but exclude the relationship between taxation and insurance. The conclusions of the paper will help the practitioners and The Financial Supervisory Authority in their decisions. We must point out that this study is a continuation of our work started in 2009.