Insurance firms to raise premiums
By Michelle Remo
Philippine Daily Inquirer
First Posted 01:20:00 09/02/2008
Filed Under: Insurance
A number of nonlife insurance companies will be forced to increase premiums charged to clients because of a regulation imposing new taxes on them, the Philippine Insurers and Reinsurers Association (PIRA) said.
“Some companies may have to increase their premiums on product lines with high losses,” PIRA said in a statement. “This will mean the consumer will again have to pay more. The timing is bad considering that all of us are reeling from the increase in prices of basic commodities.”
The PIRA made the statement in reaction to Revenue Memorandum Circular 59-2008 of the Bureau of Internal Revenue (BIR), which imposes additional taxes on the insurance industry.
The group particularly opposes the imposition of P15 worth of documentary stamp tax (DST) on certificates of insurance, which show proof of insurance coverage. This is on top of the DST on premium collection.
The PIRA said the DST on certificates of insurance will adversely affect efforts to promote micro-insurance among the poor. Imposing P15 worth of tax would defeat the purpose of selling cheap insurance coverage to poor families.
“The industry sells accident insurance with minimal amounts of cover for students and travelers,” the PIRA said. “The premiums on these plans can be as little as P10.”
RMC 59-2008 is an amended version of RMC 30-2008. The original circular imposed higher tax liabilities. The BIR was forced to tame it down following complaints from the life and nonlife insurance industries.
The BIR, however, did not omit the provision of the circular that requires the imposition of P15 worth of DST on insurance certificates.
One of the provisions of the original circular that the BIR amended was the 12-percent VAT on health and accident insurance. The new circular instead imposed a 5-percent sales tax on these types of insurance.
Another provision amended was the one excluding commissions of selling agents from the list of business costs, which are deductible from taxable income. In the amended version of the circular, the BIR allowed commissions of sales agents to be deducted from taxable income.
The amendments were made after insurance firms brought their complaint to the Department of Finance, mother agency of the BIR. The DOF then asked the BIR to seek a compromise with insurance firms.
The PIRA said it appreciated the BIR’s move to amend some of the provisions of the original circular. But the group said it would be best if the BIR would not issue a circular imposing new taxes on the insurance industry at all.
The BIR, however, earlier said the circular did not impose new taxes. Instead, it only clarified certain vague provisions of the Tax Code, under which the said taxes are required.
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