Asset share - Tax(if applicable)

Discussion in 'SP2' started by Tushar Bansal, Nov 22, 2019.

  1. Tushar Bansal

    Tushar Bansal Made first post

    In chapter 5, the component of asset share - Tax states
    "For example, any tax already paid on the investment income that has gone into the positive side of the asset share 'equation' sgould be deducted for consistency.

    What does it mean by 'positive side' and 'deducted for consistency'?
     
  2. Mark Willder

    Mark Willder ActEd Tutor Staff Member

    Hi Tushar

    The positive side of the asset share calculation is all the things that have been added to the asset share, eg premiums and investment return.

    The negative side of the asset share calculation is all the things that have been deducted from the asset share, eg claims, expenses and tax.

    Imagine investment income is 100 and is taxed at 20%. Then the Course Notes you quote are saying that the asset share should increase by 100 for the investments, but decrease by 20 for the tax, ie go up by 80. It would be inconsistent to add in the investment return of 100 without deducting the tax we need to pay.

    Best wishes

    Mark
     
  3. Tushar Bansal

    Tushar Bansal Made first post

    Thanks Mark. This makes sense now.
     

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