What is the primary purpose of Insurance Premium Tax?

The primary purpose of Insurance Premium Tax is to raise revenue for the government. This tax is imposed on insurance premiums paid by policyholders and serves as a significant source of revenue that can be utilized for various public services and government functions. By taxing premiums, governments can fund essential services, infrastructure development, and other initiatives that benefit society as a whole.

The concept of an Insurance Premium Tax is not aimed at providing financial support to customers of insolvent insurers, nor is it related to membership fees for associations or institutes in the insurance industry. Membership charges to join organizations such as the Association of British Insurers or the Chartered Insurance Institute are completely separate from the purpose and function of Insurance Premium Tax. Thus, the correct answer reflects the fundamental role of this tax in supporting governmental operations rather than serving any other specific function within the insurance sector.