Insurers oppose LTO's move to push for separate tax collection scheme

MANILA, Philippines - A controversy on the Compulsory Third Party Liability insurance program for motor vehicles in the country is again brewing over proposal to implement a separate tax collection system by the Land Transportation Office and its computerization contractor Stradcom Corp.

 A few months after announcing a breakthrough in the fight against fake CTPL policies, insurance companies have aired concern over the reported proposal of Stradcom to introduce a new tax collecting and remittance system that will allegedly cost motorists P290 million a year in additional fees.

In its letter to the Insurance Commission, the Philippine Insurers and Reinsurers Association (PIRA) said it is opposing any move that would seek to replace the existing Certificate of Cover Authenticating Facility (COCAF) which the insurance industry developed to address the problem of fake CTPL.

With the blessing of no less than Finance Secretary Gary Teves, COCAF was recently improved to include a way of collecting taxes and remitting it directly to the Bureau of Internal Revenue through an innovative “electronic wallet” system.

Sources at the Insurance Commission said Stradcom, the controversial technology provider of the LTO, presented late last week a new system that would integrate tax collection in the payment of CTPL premiums of motor vehicle owners. This new system will cost motorists P58 in new transaction fees, which will be added to the already long list of fees that Stradcom is collecting from car owners. The sources said Stradcom apparently would not allow the Insurance Commission to connect with its database if it does not approve the new system.

Insurance firms view this as another “midnight deal” in the offing, something that would earn its principals at least P290 million every year from the 5 million registered motor vehicles. Mario Valdes, PIRA general manager, said the existing COCAF system is working perfectly and its tax collection function is already doing the job.

“It took PIRA three years to design and refine this system whose main objective is to weed out fake or duplicate CTPL policies. This year, the COCAF 2.0 version was introduced with a new feature that automatically separates the various taxes such as VAT and documentary stamp tax from the premium and remits these taxes to the account of BIR,” he said.

According to Valdes, for the first two months that COCAF 2.0 has been operating last March and April, the system handled a total of 282,843 CTPL policies and remitted P11,875,149.51 in VAT and P12,723,949 in DST.