Insurers in Pakistan are facing a big threat to their business growth as the government plans to implement a major revamp in the insurance industry’s tax structure.
Pakistani newspaper The Express Tribune
reported that Finance Minister Ishaq Dar has approved a budget proposal to charge a single income tax rate of 31% from the financial year 2016-17, on all sources of income of insurance companies.
The publication, which cited sources from the Federal Board of Revenue, also reported that Dar has also cleared a budget proposal to levy a withholding tax on insurance premiums.
The sources also told The Express Tribune
that a rate of 1% withholding tax may be imposed on life insurance premiums and claims and 4% for general insurance.
In another proposal, the government would also increase tax rates on health and life insurance commission agents who do not file income tax returns.
Policy Research Institute of Market Economy executive director Ali Salman told The Express Tribune
that the proposed revisions in tax rates will have a devastating impact on the industry, making insurance costs to go up.
According to the report, the size of the insurance business in Pakistan is very small, constituting only about 0.8% of the gross domestic product.
There are six private insurers in the life sector excluding the state-owned State Life Insurance Company. About 30 general insurance companies are also operating in the country.