Demands made by the Bangladesh Insurance Association:
- Withdrawal of source tax against reinsurance.
- Withdrawal of gain tax on life insurance policyholders' profits.
- Withdrawal of advanced tax on agents' commission for two years.
- Abolition of health insurance tax.
- Reducing corporate tax rate.
The Bangladesh Insurance Association (BIA) has demanded tax exemption for health insurance in the budget for the next fiscal year.
The organisation thinks that abolishing tax on health insurance will increase premium income and the number of customers in this sector.
"Under the existing insurance law in our country, no VAT has to be paid on the premium of life insurance policy, but if a policyholder makes a policy by combining health insurance with life insurance, he has to pay 15% percent VAT on the health insurance premium. This increases the level of premium. As a result, the consumer loses interest in health insurance," said Sheikh Kabir Hossain, the president of the BIA, at a press conference on Thursday.
Mentioning that the prime minister herself has been encouraging the growth of health insurance, Sheikh Kabir Hossain said abolition of 15% tax is necessary to increase the confidence of common people in health insurance.
According to various company sources, personal health insurance has increased during the Covid-19 crisis. There is a growing awareness among people about health insurance and many people are buying health insurance policies.
Earlier, health insurance was 5-10% of the total policies, but now it has gone over 20%.
The BIA president said there is a provision to pay 5% advance tax on the agent commission, but due to Covid-19 pandemic, all the field workers have been confined within their houses for the last three months and they have not been able to work. In the interest of maintaining social distance, they are not able to go to the people's doorsteps and collect premiums. Not only are they unable to increase business, but they also cannot collect the renewal premiums.
In this situation, the government should postpone the provision of 5% advance tax payment by the insurance agents for the next two financial years, said the BIA president.
The BIA also demanded that the government withdraw VAT at the source for reinsurance.
In support of the demand, Sheikh Kabir Hossain said the insurance companies collect VAT at the rate of 15% from the customer as soon as it receives the premium and deposits it in the government treasury.
The insurance company reinsures a portion of this premium in the interest of risk management. This is an internationally recognised system. Since VAT on the entire premium is deposited in the government treasury at the time of premium collection and a portion of this premium is paid to the reinsurer, there is no scope to levy VAT on the reinsurance premium. If such VAT is levied, the matter will be considered as double taxation, he said.
The BIA president further said according to the law, the tax rate of listed banks, insurance and other financial institutions is 37%, but the insurance companies' income is very insignificant compared to the banks. So, it is not desirable that the insurance companies' tax rate is equal to that of the banking companies.
On the other hand, the tax rate of manufacturers and other service organisations is 25% or less.
Meanwhile, the corporate tax for the life insurance companies is lower than that of the non-life insurance companies in most countries of the world as they provide social security.
Therefore, the corporate tax rate for the insurance companies should not be the same as that of the banking companies. Rather it should be 35% for the non-life insurance companies and 30% for the life insurance companies, said the BIA president.
He also demanded that the rule of deducting 5% gain tax on the profits of life insurance policyholders be stopped. He said if the 5% gain tax on profits of small policyholders is not lifted, the life insurance business in the country will continue to decline and it will be difficult for companies to survive.
Apparently, the insurance companies have been making these demands for years.
When asked how many of their demands were fulfilled, Sheikh Kabir Hossain, who has been the president of BIA for almost 12 years, said, "We presented our demands many times, but often they are not fulfilled. But I am trying."
"We cannot say that none of our demands were fulfilled. Some demands were fulfilled. People do not get everything they want. Still, we have to try," said the BIA president.