- Calls on Insurance Board of Sri Lanka (IBSL) to lobby Govt. to make amendments
- About 5.7 million in labour force have no insurance, low penetration of life insurance a concern
- Inland Revenue Bill to be presented with amendments on Friday
The insurance industry has become the latest sector to protest the imposition of taxes under the proposed Inland Revenue Bill (IRB), pointing out that an additional 28% tax on bonuses for policyholders will severely undermine its growth.
Insurance companies contend that as they are already paying a 30% tax on monthly instalments, it would be unfair for the Government to impose the 14% and 28% tax proposed under the new IRB.
“Although the existing Inland Revenue Act clearly mentions that no income tax will be imposed at a point when an insurance policy is declaring a bonus it’s not working that way now. According to the new bill it says if a company is declaring a bonus for three years they must pay 14% of tax and beyond that 28% tax. I think this is very unfair,” said Ceylinco Life Managing Director and CEO R. Renganathan while addressing the 8th National Forum for Life Insurance Advisors (NFLIA) titled ‘Towards a day all Sri Lankans are insured…are we ready?’ held at the BMICH.
As some companies have publicly declared the bonus amount, he stressed these companies would have to pay 28% of that to the Government as taxes.
He categorically denied that the bonus declared was income generated by the insurance companies. “If you look at how we calculate the monthly instalments, the bonus is something the companies return back to the life insurance policyholders. Therefore, this bonus is not income. I urge the Insurance Board of Sri Lanka (IBSL) to highlight these factors to the Government and assist the industry towards building a sustainable industry,” he added.
Renganathan said out of the total population of 20.9 million, around 8.5 million were in the workforce but only 2.8 million of these people had active life insurance policies, while 5.7 million people from the labour force did not have insurance policies.
According to him the insurance industry has sold around 650,000 life insurance policies but only 325,000 are currently active policies.
Therefore, Renganathan said, even if all insurance companies collectively tried to introduce a policy to those 5.7 million people in the workforce, it would take at least 17.5 years to offer and maintain an active life insurance policy.
He admitted that there is an issue in the distribution network for low life insurance penetration in the country.
“We need to increase the number of branches, sales force, activities of the current sales force and the productivity of them to uplift the percentage of active policies. This way we will be able to reduce the time of 17.5 years, towards a day all Sri Lankans are insured,” he stated.
Finance Minister Mangala Samaraweera last week told reporters that the ministry was formulating amendments to the IRB to comply with the Supreme Court order as well as incorporate other changes proposed after discussions with private sector representatives. He said “half a day of amendments” would be read out when the bill was presented in Parliament on Friday.