Insurers seek TRO on new taxes by BIR

The country’s insurance companies have sought a temporary restraining order (TRO) on the implementation of two circulars issued by the Bureau of Internal Revenue (BIR).

Revenue Memorandum Circular (RMC) 30-2008 and its amended version, RMC 59-2008 seek to impose new taxes on the life and non-life insurance industry.

The court action was initiated by the Salvador & Associates law office in behalf of the Philippine Life Insurance Association (PLIA) and the Philippine Insurance and Re-insurance Association, representing the life and non-life insurance sectors, respectively.

PLIA director Henry Joseph Herrera said the new taxes would translate to an additional one or two percent cost on their premiums.

“We were already forced to re-price last year,” said Herrera, who is also chief executive of SunLife Financial Philippines.

Both PLIA and PIRA reiterated their position that any increase in their operational cost due to new taxes will only make their products more expensive as it will lead to higher premium cost to the insuring public, raising the possibility some insurers could fold due to too much tax burdens.

At the start of the third quarter, the BIR issued RMC 59-2008 removing some of the disputed taxes but still retained other contentious portions.

“They still retained provisions equivalent to double taxation, and retained issues pertaining to the documentary stamp tax (DST) on individual certificates in group insurance,” the insurers said.

Over the past four years, the industry had been forced to re-price upwards premiums to cope with the tax burden and the poor economic and investment climate.

Another increase in premium prices will alienate Filipinos from owning insurance protection, and force others to seek insurance coverage from foreign insurers who are not burdened by taxes. In fact, some countries even offer incentives including tax rebates to individuals acquiring insurance policies.

Less sale of policies will result in less earnings, thus less revenues to declare resulting in lower income for the government.

Already, tax collections from the life insurance industry fell 7.45 percent, or from P12.35 billion in 2006 to P11.43 billion last year.

High networth individuals continue to buy their life insurance in Hong Kong or Singapore, as these do not slap the five-percent premium taxes. It charges either a one-time, fixed-amount DST or a one-time, fixed rate DST.

“In the Philippines, we have all sorts of taxes and they charge you twice in some cases,” PLIA said.