THE Insurance Commission (IC) supports the non-life sector’s proposal of trimming taxes imposed on its premiums, with the regulator to submit its stand on the matter to the government soon.
The Insurance Commissioner said they have yet to submit to the National Tax Research Center their position on the proposed tax reduction on premiums of non-life insurance companies.
“Hiningan kami ng National Tax Research Center ng opinion namin, hindi pa namin nasu-submit ‘yun (The National Tax Research Center has asked for our opinion but we have not submitted it yet), so we will be submitting in the coming days our position paper on that… We will support tax reduction for non-life… [and] the conversion of VAT (value-added tax) to premium [tax],” Insurance Commissioner Dennis B. Funa told BusinessWorld in an interview when asked for their stand on the proposal.
The IC earlier pushed for the reduction of taxes levied on non-life insurers under the previous administration to put the sector at par with its neighbors. The regulator and non-life sector were earlier batting to cut taxes imposed on non-life insurance premiums to 8% from the current high of 27%, in a bid to increase asset coverage in the country.
House Bill (HB) 3235 filed in the previous Congress eyed to trim taxes imposed on non-life insurance premiums to as low as 2% by exempting it from the 12% VAT plus a documentary stamp tax ranging from P10 to P100 per year.
The IC had said that instead of the provisions under the bill, non-life insurance should be subject to a 5% VAT that will be called a premium tax, and to a 0.5% documentary stamp tax (DST).
On top of the 5.5% duty, a 2% tax would be collected for fire service tax, and an additional levy will be paid to local government units, which range from 0.15% to 0.75%.
However, the Philippine Insurers and Reinsurers Association (PIRA) has been bearish on the passage of their motion of reducing taxes imposed on non-life insurance premiums under President Rodrigo R. Duterte’s government.
“I am not optimistic, but we will not give up the fight,” PIRA Deputy Chairman Michael F. Rellosa told reporters in an interview.
Asked if this was discussed with Mr. Duterte’s government, Mr. Rellosa said, “You see, it goes against the plan of the government. The government wants to fund all these projects. As a matter of fact, they are actually increasing taxes, so I don’t think, policy speaking, we are going to get any ground.”
Unlike life insurance companies that are levied only a 2% tax on their premiums, the government collects the following taxes from non-life insurance holders: 12% VAT, a 12.5% documentary stamp tax, a 2% fire service tax, and a 0.15% to 0.75% local government tax.
At end-2015, taxes collected from the insurance industry climbed 12.67% to reach P19.38 billion from P17.21 billion in 2014 driven by DST, VAT, final withholding tax, other withholding tax, and premium tax.
For non-life insurance companies, bulk of their tax payments were DST and VAT, with their total DST dues at P5.81 billion last year, 4.33% higher from P241.1 million in 2014 and VAT payments at P4.62 billion in 2015, 13.86% higher from P561.78 million in the previous year.
Mr. Funa noted that the proposed premium tax on non-life insurers will be included in the fourth package of the government’s tax reform program.
Sought for comment, the Finance Department said it is still reviewing its inclusion of premium tax in the fourth package.
“We will cover the insurance but no details yet,” Finance Undersecretary Karl Kendrick T. Chua told BusinessWorld last Friday when asked if the IC’s proposed premium tax will be included in the Duterte administration’s tax reform program. — Janine Marie D. Soliman and Elijah Joseph C. Tubayan