Expensive nonlife-insurance policies as house abandons tax-rate cuts

Philippine Insurers and Reinsurers Association (Pira) is no longer hoping the proposed bill on the lowering of tax rate on nonlife-insurance products will ever be enacted under President Aquino. Pira Chairman Michael Rellosa said many of the country’s legislators are already in campaign mode, as indicated by the lack of quorum at the House of Representatives the past few months.

The proposed bill that will lower the tax on nonlife-insurance products had been pending during the 16th Congress, no matter the strong support from Insurance Commissioner Emmanuel F. Dooc.

The tax imposed on nonlife-insurance products in the Philippines is said to be the highest in the world, equal to 24.5 percent of the total premium paid for nonlife-insurance products, and 26.5 percent for fire insurance.

Nonlife-insurance products are levied a 12-percent  value-added tax and another 12.5-percent documentary-stamp tax. Fire insurance is slapped an additional 2-percent fire service tax. On top of these taxes, local governments also impose 0.15 percent up to 0.17 percent in municipal tax for property insurance.

Singapore only imposes a tax of 7 percent on nonlife-insurance policies, while Thailand imposes 11.3 percent.

Finance Secretary Cesar V. Purisima was earlier reported to have opposed the lowering of the tax, although he once supported the proposed 5-percent tax on nonlife-insurance products, which was a compromise with the insurance industry, which earlier proposed for a 3-percent tax.

The lowering of the tax on nonlife-insurance products would have been appropriate with the previous lowering of taxes by the Arroyo administration on life-insurance policies, with the old tax of 5 percent being lowered further to only 2 percent to boost the competitiveness of the country’s life-insurance industry.

Rellosa said the lowering of the tax on nonlife-insurance premium would also have been in line with the government’s new policy of promoting microinsurance as a tool for the financial inclusion of the poor, because most microinsurance products are nonlife-insurance products that provide cover for property loss.

But, as  it turns out, with the shelving of the measure on  nonlife-insurance  products, these were touted as the poor man’s protection against loss of property and income during times of natural calamities.

Such will continue to be levied a very high tax rate of 24.5 percent.

-- Business Mirror