The Securities and Exchange Commission of Pakistan (SECP) has asked the Federal Board of Revenue (FBR) to extend "tax credit" to individuals, paying premium to acquire general insurance from an insurance company from 2009-10. In case, the government approves this proposal, general public would prefer to get insurance of their personal property, which would expand the scope of insurance business in Pakistan.
Sources told Business Recorder here on Thursday that the insurance density and penetration of Pakistan is amongst the lowest in the world. In order to partly rectify the situation and bring spark in the insurance industry, the SECP strongly recommended extending tax credit to individuals in respect of premium paid to acquire general insurance from an insurance company duly registered under the Insurance Ordinance 2000.
The tax credit will provide an incentive for the individual to purchase general insurance policies, leading to their protection as well as increase much needed expansion of the industry as a percentage of the gross domestic product (GDP).
This would certainly bring additional revenue to the national exchequer in terms of increased duties and taxes on insurance policies and will also improve the personal lines business viz. household, travel, health and personal accident insurances, which is at its lowest.
Presently, out of the total non-life business portfolio of about Rs 36 billion, these lines generate cumulatively about Rs 200 million, ie a mere 0.55 percent. If the proposed tax credit is allowed, people will be encouraged to get insurance of their personal property, which is the need of time as well as generate additional business, thus contributing towards better insurance penetration level.
According to the proposed amendment in the Income Tax Ordinance 2001, a person shall be entitled to a tax credit in the tax year in respect of regular general insurance premium for the value of premium/contribution paid by the person in that year in respect of policy issued by a general insurance company registered in Pakistan, the SECP added.
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