Nonlife insurers need tax cut
MANILA - Insurance Commissioner Emmanuel F. Dooc is pushing for the lowering of taxes imposed on nonlife insurance companies to allow them to compete with foreign corporations that may come into the country when the Asean economies start integrating by 2015.
At a discussion with the BusinessMirror on Tuesday, Dooc said the proposed lowering of taxes imposed on nonlife insurance premiums has the support of the leaders of Congress, as well as by Finance Secretary Cesar V. Purisima.
Dooc said the lowering of the tax regime on nonlife insurance products is necessary to make the country’s insurance industry competitive by the time the Asean financial integration starts in 2015. The premium tax rate for the life insurance had already been lowered to 2 percent through legislation passed in 2010 and signed into law by then President Gloria Macapagal-Arroyo.
“The problem now is the tax regime on non-life—in which, between the two industries, the nonlife suffers the most—because the tax rate constitutes between 25 to 27 percent. So, for every peso premium, you pay 25 to 27 centavos for tax. And there are other overhead expenses which make it difficult to make a profit,” Dooc said.
Dooc said Speaker Feliciano Belmonte and other leaders of Congress have expressed their support for the lowering of the tax, and the only contentious issue is how much the new tax rate that will be.
At present, the Philippines has the highest tax rate imposed on non-life insurance premiums at 25 percent for property insurance, and 27 percent for fire insurance. The second highest tax rate imposed in the Asean is that imposed by Vietnam, which imposes the tax at a mere 12 percent. Singapore imposes a 7-percent tax on nonlife insurance premium.
Dooc said the high tax rate will put the country at a disadvantage against foreign competitors when the Asean integration starts because the non-life insurance products of local insurance companies would prove more expensive.
“If we can lower it to 10 percent, then we’re better off than Vietnam, but still competitive with the rest of the Asean, particularly in light of the forthcoming Asean financial integration. So we hope that we’ll be able to get it done with the help of the industry,” Dooc said.
Mitch Rellosa, president and chief operating officer at Fortune General Insurance, bared full support for Dooc’s initiatives at the Insurance Commission but bared the sentiment that the country’s nonlife insurers would like a premium tax rate lower than 10 percent.
According to Rellosa, the Philippine Insurers and Reinsurers Association (Pira), which groups the country’s non-life insurance industry, proposes a more competitive and equitable premium tax rate of only 5 percent.
He said an insurer from Singapore or Malaysia may offer property protection products at much cheaper rates than local counterparts because their services are taxed at significantly lower premium rates than are members of the Pira under the existing tax infrastructure.
In other words, the domestic nonlife insurer is prospectively forced to offer his protection products at much higher premium because of the existing premium tax regime, putting the locals at a price disadvantage.
Scaling back the nonlife premium tax to more or less five percent should already allow local insurers to compete with foreign counterparts on equal footing under a financially integrated Asean beginning 2015, Rellosa said.
In Photo: Insurance Commissioner Emmanuel F. Dooc (fourth from left) fields questions from reporters and editors of the BusinessMirror, Pilipino Mirror, DWIZ and Philippines Graphic during a forum on Tuesday. Joining Dooc at the forum are ALC Group of Companies Chairman Emeritus Ambassador Antonio L. Cabangon Chua (fifth from left), BusinessMirror Publisher T. Anthony Cabangon (fourth from right) and top officials of the insurance companies under the ALC Group, including Fortune Life, FortuneCare, Fortune General and Eternal Plans Inc.