By David Cagahastian
The various insurers, with the support of the Insurance Commission, has urged Congress to lighten the tax burden on the nonlife insurance industry in preparation for the “Big One,” or the big earthquake seen along the Marikina Valley fault line cited by government scientists.
Philippine Insurers and Reinsurers Association (Pira) Chairman Michael F. Rellosa said the proposed lowering of tax rates on the nonlife insurance industry will help the country prepare for the devastation when it finally comes. At present, the premium tax imposed on nonlife insurance policies is the highest in the world, ranging from 24.5 percent to 26.5 percent.
Nonlife insurance companies are slapped with a 12-percent value added tax (VAT) on top of a 12.5-percent documentary stamp tax (DST), while fire-insurance policies are levied an additional 2-percent fire service tax. On top of these, local governments also impose 0.15 percent to 0.17 percent in municipal tax for property insurance covers.
Singapore only imposes a tax of 7 percent on nonlife insurance policies, while Thailand imposes only 11.3 percent.
Insurance Commissioner Emmanuel F. Dooc supported the call for lower taxes and has pushed for the passage of the bill in Congress to help prepare the nonlife insurance industry for more stringent competition when the economic integration within the Asean starts in 2016.
“It is truly unfair and unjust for our nonlife insurance industry to continuously shoulder these onerous taxes, the highest anywhere in the world, at 24.5 to 26.5 percent,” Dooc said. At various times in the past, PIRA officials stressed the advantage of having lower tax rates on non-life insurance policies, such as taking the load off the government in the post-disaster reconstruction process.
For instance, PIRA said that in the aftermath of Supertyphoon Yolanda (international code name Haiyan) in 2013 when the estimated economic losses aggregated P571 billion, local insurers reported losses amounting to P66 billion because many of the victims were not insured. The cost of the reconstruction required in the aftermath of the disaster effectively became the responsibility of the government.
Rellosa said were the tax on nonlife insurance policies reduced, such become more affordable for everybody as shield against post-disaster losses.
In 2010 Congress already reduced the tax imposed on life insurance policies from 5 percent to only 2 percent. The Pira now lobbies for a similar law that will lower the tax for nonlife insurance companies to more or less 5 percent.