The Study on the Personal Income Tax of the Policyholder Dividends and Its Impact on Chinese Insurance Industry
Author(s)
Wen Yan*
ABSTRACT
The policyholder dividend of participating insurance is essentially different from the usual equity and bond profit. There are disputes on taxing methods in theory and practice, and different countries adopt different taxing methods. This paper designs a basic framework of the personal income tax system on participating insurance policy. This policy is based on the reality that the participating insurance accounts for a higher proportion in the Chinese insurance market, which is conducive to increase the demand for insurance and the tax sources. The author believes that levying taxes is allowed, but there is no basis to tax on the total policyholder dividends, while tax on the part of policyholder dividends is reasonable. Finally, this paper analyzes the impact on the demand of life insurance industry and the total tax revenue to levy personal income tax on policyholder dividends. The author concludes that the taxing method designed in this paper is better than the taxing method levying tax on the total policyholder dividends.
The policyholder dividend of participating insurance is essentially different from the usual equity and bond profit. There are disputes on taxing methods in theory and practice, and different countries adopt different taxing methods. This paper designs a basic framework of the personal income tax system on participating insurance policy. This policy is based on the reality that the participating insurance accounts for a higher proportion in the Chinese insurance market, which is conducive to increase the demand for insurance and the tax sources. The author believes that levying taxes is allowed, but there is no basis to tax on the total policyholder dividends, while tax on the part of policyholder dividends is reasonable. Finally, this paper analyzes the impact on the demand of life insurance industry and the total tax revenue to levy personal income tax on policyholder dividends. The author concludes that the taxing method designed in this paper is better than the taxing method levying tax on the total policyholder dividends.
Cite this paper
W. Yan, "The Study on the Personal Income Tax of the Policyholder Dividends and Its Impact on Chinese Insurance Industry," iBusiness, Vol. 5 No. 1, 2013, pp. 58-63. doi: 10.4236/ib.2013.51B013.
W. Yan, "The Study on the Personal Income Tax of the Policyholder Dividends and Its Impact on Chinese Insurance Industry," iBusiness, Vol. 5 No. 1, 2013, pp. 58-63. doi: 10.4236/ib.2013.51B013.
References
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[1] Li Guodong.Shall Individual Income Taxes be Paid on Dividends from Participating Policy? [J]. Foreign tax,2006,No.9, 33-36. [2] Wang Han, Gu Yi. The cha-racteristics and the tax system improvement of new life insurance products in China[J]. Accounting Communica-tions, 2007, 6, 23-24. [3] Wang Han. the study on per-fecting the tax system of new life insurance in China[J]. Shenzhen finance, 2007, 11, 29-31. [4] Liu Di. The innovation on insurance products challenges existing insurance tax system [J]. Shanghai Finance, 2004, 11, 13-15. [5] Wang Yanbin. The study of levying per-sonal tax on the participating insurance [J]. Shanghai Finance, 2006 ,3, 14-16. [6] Deng Yunan. The impact of insurance tax system on insurance product innovation [D]. Chengdu: finance department of Southwest Univer-sity of finance and economics, 2006. [7] OECD,2001, “ Taxing Insurance Companies”,OECD Tax Policies Studies No.3，the Chinese name is called The internal target management and tax management in insurance company (not published). [8] IRS,2004, “Your Fed-eral Income Tax”(for individuals for use in preparing 2004 returns)，www.irs.gov [9] Harold D. Skipper Jr., 2001, “The Taxation of Life Insurance Policies in OECD countries: Implications for Tax Policy and Planning”, www.oecd.org/daf/insurance-pensions/ [10] Establishing Life Insurance Tax Policy in Developing Countries. UNCTAD (United Nations Conference on Trade and Development) . 1985 [11] Swiss Reinsurance Company. A Comparison of Social and Private Insurance, 1970-1985, in Ten Countries, Sigma, Swiss Reinsurance Co., Zurich. (1987). [12] Seiichi Kondo.Insurance and Private Pensions Compendium for Emerging Economies (2002), OECD, Paris. [13] OECD (1999). Report on the conference on insurance regulation and supervision in Asia (Singapore,1-2 February 1999), OECD, Par-is. [14] Goshay. Robert.Net Income as a Base for Life Insurance Company Taxation in California: Implica-tions.1976. Journal Of Risk and Insurance. 1976. [15] Gupta.K Newberry.Determinants of the Va-riability in Corporate Effective Tax Rates:Evidence from Longitudinal Data. Journal of Accountancy. 1997.