BIR to decide by June on proposed CTPL tax plan

MANILA, Philippines - The Bureau of Internal Revenue (BIR) will decide by early June the payment and tax collection program in relation to the long unresolved comprehensive third party liability (CTPL) insurance on motor vehicles.

One proposed system proposed by Stradom Corp., the information technology provider of the Department of Transportation and Communications (DOTC) and the Land Transportation Office (LTO), seeks to integrate tax collection and the payment of CTPL premiums.

The other system, meanwhile, was developed by the Philippine Insurance and Reinsurance Association (PIRA), the trade organization of the non-life insurance industry. Known as the Certificate of Cover Authenticating Facility (COCAF) 2.0, the proposed system weeds out fake or duplicate CTPL policies and automatically separates the various taxes such as value-added tax (VAT) and documentary stamp tax (DST) from the insurance premium and remits these taxes to the account of BIR.

In a meeting last week between the proponents of the two systems and officials of the Insurance Commission and BIR, it was agreed that the two proponents would submit their proposals to the revenue-collecting agency which, in turn, would make its final recommendation on which system to adopt by early June.

IC deputy commissioner Vida Chiong said they would insist that whichever system is adopted, it should pass its IT gateway. That would allow the IC to know which insurer is selling CTPLs as well as ensure that all tax collectibles are accounted.

Chiong explained that connecting with the gateway will not entail additional costs. “What we want to ensure is the protection of the public, the proper collection and payment of government revenues, and the recording of policies written (in this case, CTPL). There is no need for additional costs to the public,” she stressed.

PIRA representatives during the meeting argued that the COCAF 2.0 has been operational since March, resulting in P24 million in combined VAT and DST collections (covering the months of March and April).

“For the first two months of COCAF 2.0, the system handled a total of 282,843 CTPL policies and remitted P11,875,149.51 in VAT and P12,723,949.00 in DST,” the PIRA informed The STAR. They likewise claimed that the Stradcom version would result in additional P58 to the existing cost of auto registration including the CTPL.

“With COCAF, every insurance policy sold is authenticated and verified. The system will not allow registration of motor vehicles if the insurance policy fails in the authentication process,” PIRA chairman Mitch Rellosa said.

All motor vehicles are required to get a CTPL insurance to answer for deaths or bodily injuries of other persons.

In the past, reports of fake CTPL insurance policies or one insurance policy being sold several times have been publicized. PIRA officials said it puts a bad light to the industry that does not have anything to do with the fraudulent activity.

CTPL policies are generally sold in three variants and prices, namely, motorcycles and tricycles (P300.40), private cars (P610.40), vans (P660.40) and trucks (P1,250.40).

It includes corresponding taxes: P50 for motorcycles and tricycles; P110 for cars; P120 for vans; and P236 for trucks. Likewise, an additional fee of P50.40 is slapped for interconnecting with the LTO database and Stradcom.

In 2008, the CTPL business is reportedly worth P3.5 billion covering the registration of 5.5 million vehicles. An estimated annual tax collection of P600 million should go to the national coffers from the CTPL business in the form of DST, VAT, local government charges, among others.

The CTPL is a mandatory insurance for motor vehicles that carry a P100,000 coverage for liabilities to third parties in case of death or injuries.