There are ongoing discussion between the Nigerian Insurers Association (NIA) and Federal Inland Revenue Service (FIRS) to review the provision that mandates underwriting firms to pay tax on their claims, among others, LEADERSHIP has learnt.
Moreover, the operators have also approached the ministry of finance through the National Insurance Commission (NAICOM) to find a lasting solution to the issue.
Speaking on this development, chairman, Nigerian Insurers Association (NIA), Mr. Eddie Efekoha, said the insurance industry was subjected to multiple taxation that was gradually eroding the profits of insurance companies, thereby, affecting their ability to give good returns on investment to shareholders as well as stakeholders.
Stating that some of its members’ offices were closed down by agents of Federal Inland Revenue Services (FIRS) for tax defaults, Efekoha, who is also the managing director of Consolidated Hallmark Insurance Plc, noted that NIA has intervened and was already having a mutual understanding with FIRS to soft-pedal on this issue.
He, however, believes the permanent solution lies in amending the tax code which takes some time to amend, as it has to be amended by the national assembly.
“’Giving returns on investment to shareholders and stakeholders has a lot to do with how much you make as profit but in a scenario like ours, where we are subjected to multiple taxation, it becomes difficult to pay dividend to shareholders.
“The more tax we pay, the more the returns to our stakeholders diminish. If you are to pay tax on claims and on management expenses, what this means is that you have little or nothing left to pay dividend to shareholders,” he pointed out.
In his own reaction, the general manager, Retail Life, AIICO Insurance Plc, Mr. Sola Ajayi, said, the tax code in Nigeria was too hard on both life and non-life insurance companies as they were not allowed to take advantage of deferred tax, especially, for life business.
“We cannot take advantage of those taxed assets because of Section 33 and Section 16 of the tax code. Section 33 is saying, we must pay minimum tax, while Section 16 is saying, even when you have a tax exempt income, you must still come back and pay something. So, you cannot exempt paying tax on the life business where some are even incurring losses and you cannot fully take advantage of all your reliefs,” he said.
He pointed out that though, NIA and KPMG have done some work on this, operators still need to get to the national assembly to change the Act to exempt particularly life business from paying taxes when they are making a loss or when they have relief allowances to take advantage of.