Reform of the Taxation of Korean Life Insurance Industry
Asian Tax Journal Vol. 11 No. 1 (2010), pp. 9-42
Abstract
The purpose of this research is to suggest the reform of tax system of Korean life insurance industry, ultimately enhancing the competitiveness of the industry. In order to achieve the research purpose, we summarized the current Korean tax codes, and the taxation systems of major OECD countries. This study suggests the reform of the tax system for the Korean life insurance industry as follows：First, the current tax exemption policy for the insurance proceeds should be maintained. Second, according to their purposes, the savings－type insurance premiums with a maturity of less than ten years should be applied to different taxation systems. Third, the current deductions for insurance premium should be separated into each deductions for life insurance, accident insurance, and casualty insurance. Fourth, the deduction amount of insurance premiums of insurance exclusively for handicapped persons should be raised. Also, the current inheritance tax imposed on policy benefits should be reformed as follows：First, inheritance deduction of the death benefit should be set apart from other financial properties. Second, it needs to deduct certain amount according to the number of heirs, not to total amount of inheritance. In addition, the same earned income deduction as that for wage earners should be given to solicitors whose income amounts to less than a certain amount. Finally, the plan of the Korean government to abolish the current education tax for insurance companies, and to impose value added tax instead should be approached with prudence. In the future, as economy develops and Korea enters into aging society, the commercial insurance, especially life insurance companies, will make up for what the social security of the government lacks. Accordingly, the strengthening the aspect of social security and the risk protection of life insurance companies will be demanded at a even higher level. Therefore, the Korean tax authority should pay more attention to the strengthening of competitiveness of the life insurance industry, and the various suggestions presented in the paper may be applied to the attention.
Keywords
- life insurance industry
- insurance proceeds
- education tax
- deductions for insurance premium
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