FIRS advances efforts to amend controversial insurance law
The Federal Inland Revenue Service (FIRS) has made proposals to the National Assembly to amend provisions of Section 16 of the Companies Income Tax Act (CITA) to allow a level playing field for insurers, chairman, FIRS, Babatunde Fowler has said.
Fowler, represented by Toluwalase Akpomedaye, FIRS Regional Coordinator, made the disclosure during a seminar on, “Taxation Matters in Insurance Value Chain”, organised by Leadway Assurance Limited in Lagos.
Sequel to this, insurers have cried out over the controversial Section 16 of the CITA which set out specific rules with respect to the taxation of insurance business. They describe it as a tax burden on their business.
The FIRS boss stated that under the CITA, Non-Life insurance companies are taxed on the basis of their gross premiums and interest as well as other receivables less returned premiums, premiums paid on re-insurance and reserve for unexpired risks.
Fowler noted that from recent engagements, it has been identified that there are some provisions of the tax laws that are not favorable to the industry and several suggestions have been made, stating that FIRS will allow a level playing field to all taxpayers in line with the taxation canon of equity and fairness.
He said insurance plays a pivotal role in any economy as it seeks to help individuals and businesses manage risk by transferring and sharing the burden of risk with the insurance carrier.
He said: “Over the years, the Nigerian insurance industry has undergone significant reforms and is now a fairly developed sector. Insurance penetration in Nigeria is still very low and total contribution of the industry to GDP is within the 1 per cent range. There is need for stakeholders to work together to increase the size and contribution of the sector not only to GDP, but also to tax collection.
Oye Hassan-Odukale, managing director, Leadway Assurance Limited, on his part said the tax sessions would help improve the relationship between FIRS and the industry.
He noted that the event was part of his companies contributions to the development of the industry and by extension the economy.
He agreed that there is need for the industry to have yearly interaction forum with FIRS and Lagos State Inland Revenue Service (LIRS).
In a presentation by an expert of Pricewaterhousecooper (PWC), Kenneth Erikume said tax and insurance are two important aspects of the economy that are yet to live up to their potential.
He noted that insurance faces significant legacy and structural challenges and strict application would kill the insurance industry.
“Section 16 of the CITA set out specific rules with respect to the taxation of insurance business. CITA having identified the specialised nature of the insurance business dedicates a whole session of the Act to the taxation of the insurance industry, for the treatment of income derived from insurance business. Section 16(8) of CITA allows the companies to deduct a percentage of the premium income into a reserve before arriving at the total profit for tax purposes.”
He however called for a yearly tax interactive session with the industry to help address all tax related concerns clogging the progress of insurance business, adding that such sessions have helped foster understanding with other sectors of the economy.
Modestus Anaesoronye