ISLAMABAD: For the first time, the Securities and Exchange Commission of Pakistan (SECP) has forwarded suggestions to the provinces for taking budgetary measures for promoting the insurance sector and outreach of capital markets across the country.
The proposals have been forwarded to all four provinces as many subjects were not the federal matter and under the domain of the provincial taxation authorities.
Since Pakistan has one of the lowest insurance penetration in the region, the regulator has proposed measures for the promotion of low-ticket insurance products and personal lines of non-life insurance business to serve the poor and most vulnerable segment of society.
“… Micro-insurance products can play an instrumental role in the development of the insurance market in Pakistan,” believes the SECP.
The regulator proposes restoration of historically available exemption from sales tax on life insurance, health insurance and reinsurance services.
The SECP has said that the imposition of sales tax on life insurance, health insurance and reinsurance services by provincial revenue authorities would severely hamper the insurance penetration in Pakistan, which is already on the lower side, for the following reasons.
The other proposal was to exempt provincial sales tax on personal lines on non-life insurance business.
The SECP has also proposed to exempt personal lines of non-life insurance business such as personal accident insurance, travel insurance and home property / household insurance from the provincial sales tax.
It has asked the provinces to revoke levy of stamp duty on the insurance services, and said that all the provisions related to stamp duty on insurance services should be removed from the Stamp Act 1899.
It has been suggested that insurance agents be exempted from withholding / sales tax on their commission.
There were proposals for documenting real estate sector and promoting REITs structures by giving concessional stamp duty and transfer fees for transfer of property to and from REITs scheme.
The commission has also asked the provinces to streamline their jurisdiction issues related to provincial sales tax on services. The SECP has highlighted that the provincial sales tax is applicable on the management services including fund and assets management services.
Published in Dawn, May 15th, 2022