President's Budget Includes Measure To Close Tax Loophole That Favors Foreign-based Insurance Groups
Foreign Insurers Use Deceptive Scare Tactics to Preserve Unfair Tax Advantage
WASHINGTON, April 12, 2013 /PRNewswire/ -- A proposal in President Barack Obama 's FY 2014 budget would defer a tax deduction for reinsurance premiums paid to foreign affiliates by domestic insurers, thereby closing a tax loophole that costs the Treasury billions of dollars in tax revenues annually and provides foreign-based insurance groups a significant, unfair advantage over their U.S. competitors.
Under the loophole, domestic insurance companies with foreign-based parents can escape U.S. tax on much of their underwriting and investment income derived from their U.S. business merely by reinsuring this business with a foreign affiliatein a low-tax or no-tax jurisdiction. This provides them an advantage over domestic groups in attracting capital for writing insurance to cover U.S.-based risks and erodes our tax base.