TAXATION The ABI has been driving change on behalf of members to support the tax industry and deliver positive outcomes for customers. OECD two-pillar proposals to reform the international framework We have worked to advance the interests of members throughout 2022 with intensive advocacy at all levels of government and internationally with the Organisation for Economic Cooperation and Development (OECD). This has been successful in terms of the scope of the measures and the timing of implementation. With the OECD Secretariat and fiscal authorities in the UK and overseas, we have worked to get to significantly better positions for the industry on both Pillar One (reallocation of taxing rights) and Pillar Two (global minimum corporate tax of 15%). We have successfully convinced the OECD that regulated insurance and reinsurance should remain outside the scope of Pillar One. On Pillar Two, we identified three technical areas that were of particular concern to the insurance industry: The mechanism to address temporary differences should not limit deferred tax assets and liabilities to the 15% minimum rate. Holdings in investment vehicles to back policyholder liabilities should not result in additional tax. The Additional Tier 1 capital exemption given to banks should also be applied to insurers. Items 2 and 3 are now being addressed by the OECD and we are expecting positive guidance in favour of the industry shortly. We have also been calling for a delay in the implementation of Pillar Two until there is agreement internationally on a common approach and timeline, and this will continue to be a focus. VAT review Alongside the UK Treasury, we have been working to launch a wholesale review of the VAT treatment of financial services in the UK post Brexit. The ABIs David Jordorson is deputy chair of the industry working group comprising representatives of HMT, HMRC and 11 financial services industry bodies. He wrote to Financial Secretary to the Treasury (FST) Lucy Frazer on behalf of the group in February. In April, the FST said she was considering the recommendation and had instructed officials to work on proposals for the scope of a review. However, the FST has subsequently changed twice and we have now written to the new incumbent, Victoria Atkins. Insurance Premium Tax This year, we have focused on maintaining the current rate of Insurance Premium Tax (IPT) in the short term, while asking government to consider cutting the rate in the future. We have continued to highlight the regressive nature of IPT and that it disproportionately affects the lowest earners in our society, particularly during a cost-of-living crisis. We commissioned research from policy consultants Public First, which was published in November, that noted almost four-fifths of respondents thought it unfair of the government to raise taxes on taking out insurance, even if it was trying to bring in additional income. We have also continued to highlight concerns that IPT disincentivises the take-up of products such as private medical insurance. IFRS 17 We have been successful in persuading HMRC to spread the tax impact of the accounting transition to International Financial Reporting Standard (IFRS) 17 over 10 years. We have helped to drive the industry response to regulations proposed by HMRC to implement this policy and continue to focus on the interaction of IFRS 17 and the proposed implementation of Pillar Two. Tax Convention 2022 Another successful tax convention was held at Wyboston Lakes in September. It was attended by 181 delegates from 44 different companies. The representatives attended sessions on international taxes, cross-border tax disputes, tax transparency and indirect taxation, among a wide range of topics. Feedback on the convention was overwhelmingly positive and we are already planning next years 10th anniversary event.