Insurers seek tax, VAT breaks in next budget

The Bangladesh Insurance Association (BIA), a platform for insurance companies, has proposed withdrawal of the VAT applicable to policyholders in order to help the health insurance sector expand.

If a policyholder bundles health insurance with life insurance, they have to pay a 15 percent value-added tax on the health insurance premium. This increases the overall premium amount, resulting in customers losing interest in health insurance, said the BIA.

The demand came as Md Imam Shaheen, an executive committee member of the association, placed the budget proposal for the next fiscal year during a meeting with National Board of Revenue (NBR) officials at the latter's headquarters in the capital's Agargaon yesterday.

The organisation also proposed scrapping the 5 percent gains tax on profits made by policyholders of life insurance companies.

The imposition of the gains tax is leading to a continuous decrease in the number of policyholders, Shaheen said.

"If the provision of the gains tax is not withdrawn, the volume of life insurance business will continuously decrease and it will be difficult for insurers to survive."

The rate for listed banks, insurance and financial institutions is 37.5 percent. But because insurance companies do not earn as much as banks, the association proposed to view insurance companies like other service organisations and set a new corporate tax rate.

The BIA also called for withdrawing the value-added tax on the premium for agricultural, livestock, and crop insurances for the development and widening of the farm sector.

ATM Tariquzzaman, managing director of the Dhaka Stock Exchange, said brokers are charged a tax of Tk 50 against a trade of Tk 100,000. It was Tk 15 earlier.

He suggested reducing the fee considering the post Covid-19 market situation and global economic pressures.

Tariquzzaman also demanded a reduction of the corporate tax rate of the listed companies.

Shaifur Rahman Mazumdar, managing director of the Chittagong Stock Exchange, said the tax rate for the non-listed companies should be increased.

Currently, the corporate tax rate for listed companies is 20 percent while it is 27.5 percent for non-listed companies.

Speaking at the event, NBR Chairman Abu Hena Md Rahmatul Muneem said: "After graduation from the LDC status, we will have to increase the capacity in different sectors. The government's total tax revenue should also be increased."

"So, companies will have to move away from their dependency on tax exemptions. Besides, we will have to increase the tax net."

Bangladesh has one of the lowest tax-to-GDP ratios in the world.

"However, the NBR will consider if unreasonable tax pressure is created in different sectors, including banks," Muneem added.