X2.1 looks at comparing the BLAGAB tax basis for unit linked business with a new proposed tax basis (tax on premium income at uniform rate of k%).
The solution for 'Investment' states that:
This current taxation approach favours equities and property with high capital growth, eg due to the deferral of tax payment on capital gains.
Under the proposed regime, both income and gains will be tax-free.
This means that it may be desirable to adopt a different investment strategy for the non-unit component of the liabilities that will need to be set up for new business.
It might also lead to a different investment strategy in any managed unit-linked funds, eg less equity and more bond investment.
My question is, if the new taxation basis does not tax on income and gains, would it not be beneficial to have more investments in equities and properties? Why does the solution state otherwise for both unit and non-unit fund investment strategy?
The solution for 'Investment' states that:
This current taxation approach favours equities and property with high capital growth, eg due to the deferral of tax payment on capital gains.
Under the proposed regime, both income and gains will be tax-free.
This means that it may be desirable to adopt a different investment strategy for the non-unit component of the liabilities that will need to be set up for new business.
It might also lead to a different investment strategy in any managed unit-linked funds, eg less equity and more bond investment.
My question is, if the new taxation basis does not tax on income and gains, would it not be beneficial to have more investments in equities and properties? Why does the solution state otherwise for both unit and non-unit fund investment strategy?