By Modupe Gbadeyanka
The Federal Inland Revenue Service (FIRS) has agreed to propose to the National Assembly to amend Section 16 of the Companies Income Tax Act (CITA), which some insurance companies have raised concerns about.
Chairman of FIRS, Mr Babatunde Fowler, made this disclosure last week at a seminar organised in Lagos by Leadway Assurance Limited with the theme ‘Taxation matters in Insurance Value Chain.’
During the programme, Mr Fowler, who was represented by FIRS Regional Coordinator, Mrs Toluwalase Akpomedaye, noted that some provisions of the laws that were unfavourable to the industry would be looked into and amended appropriately to allow a level-playing field to insurers.
He called for a yearly tax interactive session by stakeholders to address tax concerns clogging the insurance business, adding that such sessions have helped foster understanding with other sectors.
Mr Fowler pledged FIRS’ commitment to the industry, stressing that the concerns expressed by operators were being looked into and charged operators to pay tax, adding that the economy needs tax to thrive.
According to him, insurance plays a pivotal role in the economy as it seeks to help individuals and businesses manage risks by transferring and sharing their burden with the insurance carrier.
“Over the years, the insurance industry has undergone significant reforms and is a fairly developed sector. Insurance penetration in Nigeria is still very low and total contribution of the industry to GDP is within the one 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.
“Generally, there are two broad categories of insurance business in Nigeria which includes Life insurance business and non-life insurance. Non-life insurance include fire, accident, motor vehicles, burglary, marine, G-in-transit, personal accident, loss of profit, public liability, workmen compensation, all risks, engineering policies, etc. Nigerian Re-Insurance Corporation acts as insurer to the insurance companies.
“In Nigeria, there are many international and indigenous insurance companies. Insurance like any other economic activity is subject to the tax rules in Nigeria. Under the CITA, non-life insurance companies are taxed on the basis of their gross premiums and interest as well as other receivables less the following: (i) returned premiums (ii) premiums paid on re-insurance (iii) reserve for unexpired risks
“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,” the tax chief said.
Managing Director of Leadway Assurance Limited, Mr Oye Hassan-Odukale, said the tax sessions would help improve the relationship between FIRS and the industry.
He noted that the event was part of his company’s contributions to the development of the industry and the economy.
He agreed that there was need for the industry to have yearly interaction fora with FIRS and Lagos State Inland Revenue Service (LIRS).
On his part, a representative of Pricewaterhousecooper (PwC), Mr Kenneth Erikume, disclosed that tax and insurance are two important aspects of the economy that are yet to live up to their potential, noting that insurance faces a lot of challenges and that strict application would kill the industry.
more recommended stories
Asian Stocks Fall Broadly as Investors Await Fed Rate Outcome
By Investors Hub Asian stocks fell.
European Equities Close Mixed as Traders Observe Brexit Developments
By Investors Hub European stocks are.
US Stocks Open Higher on Bargain Hunting
By Investors Hub The major U.S..
24 Stocks Lift Nigerian Stock Market by 0.70%
By Dipo Olowookere The bearish trend.