Prospects for Capitalization of Insurance Companies in Ukraine in the Context of the Income Tax Reform

• Main Authors: Boiko Svitlana V., Shirinyan Lada V.
• Format: Article
• Language: English
• Published: Research Centre of Industrial Problems of Development of NAS of Ukraine 2019-09-01
• Series: Bìznes Inform
• Subjects: dividends; income tax; withdrawal capital tax; insurance companies; net profit; pre-tax financial result
• Online Access: https://www.business-inform.net/export_pdf/business-inform-2019-9_0-pages-272_280.pdf

The article is aimed at studying the prospects of capitalization of insurers in Ukraine, subject to the reform of income taxation and the introduction of a tax on withdrawn capital. The publication examines the capital structure of insurers and the macro-economic indicators of the Ukrainian insurance market, identifies the macro-economic tendencies regarding the capital and equity of insurers. The most dynamic in the content of the capital of insurers are liabilities. An empirical analysis of the financial result before taxation and the net profit of insurance companies, dividend payments and propensity for dividend payments in the medium term is carried out. The absolute difference in the capital of insurers, which can potentially be obtained as a result of income tax reform, has been defined. The procedure for calculating the absolute difference in the capital of Ukrainian insurers after the reform of income taxation is proposed in the form of difference in the financial result before taxation and dividends, other payments to be taxed. An iIncreased capitalization of the insurance market is possible through the capitalization of the net profit of insurers. In other words, insurance companies will be able to increase their net capital by the size of the pre-tax financial result, reduced by dividends and other withdrawal payments. With this approach, the size of dividend payments becomes an important factor of influence. Prospect for further research in this direction is definition of the tax component as one of the priorities in the context of capitalization of Ukrainian insurance companies and improving the competitiveness of the insurance market in Ukraine, taking into account the European integration.