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As part of its broader thrust to reform its tax system, the Philippine government is discussing a bill that will reorganise the taxes imposed on capital gains and various financial instruments, including those levied on insurance products.
According to the Department of Finance, the current tax structure has too many different tax rates and treats comparable financial instruments unequally, leading to confusion and increased administrative and compliance costs.
The bill, which is currently pending in the legislature, will instead impose a flat 15% capital gains tax, and will lower the premium tax on insurance products from the current 12% to 2% for life insurance and 5% for general insurance, reported BusinessWorld.
While representatives for other financial sectors mostly agreed with the bill, Philippine Insurers and Reinsurers Association (PIRA) executive director Michael Rellosa disagreed, arguing that life and general insurance products should be taxed equally.
“PIRA requests the DST on non-life policy be similar to the current related tax rates imposed on life insurance policies,” he said.
Rellosa added that the government must remember that the Philippines is prone to natural disasters, which shows the need for affordable insurance policies to protect properties against these catastrophes.
“We would not like our countrymen to purchase insurance from our neighbors simply because it is cheaper,” he said.
