Insurance companies through the Private Sector Federation (PSF) have requested the government to cut the Value Added Tax (VAT) on insurance premiums, saying that it depresses demand for insurance products and lowers sales.
Robert Bayigamba, the Chairperson of the PSF said that insurers had raised the issue to Rwanda Revenue Authority (RRA) in their recent meeting.
“The insurance companies operating in other EAC member states like Kenya, Uganda and Tanzania do not pay VAT on collected insurance premiums,” Bayigamba said.
His latest request to government was made on Monday during a one day dialogue between the PSF and the Minister of Finance and Economic Planning John Rwangombwa.
The meeting aimed at discussing fiscal and economic policy issues that affect the business community.
Bayigamba noted that local insurance firms would not be competitive if the VAT is not aligned to that paid by regional competitors.
“We are going to look at it and find out ways on how we can solve the matter” said Minister Rwangombwa.
If government slashes the VAT on insurance premiums, it could possibly increase the insurance penetration in the country which was estimated at 1.5 percent of the Gross Domestic Product (GDP) by mid last year.
Central Bank statistics as at June 30, 2009 show that Rwanda’s insurance industry is still small with only eight insurers facilitated by only six insurance brokers.
Meanwhile the PSF is also lobbying government to lower taxes imposed on imported fuel in order to ease escalating transport charges.
“We believe the increase of excise duties from 3 percent to 76 percent could have had a significant influence on prices, this weighs heavily on the fuel dealers in Rwanda,” said Bayigamba.
Rwangombwa explained that government intends to revise the taxation on petroleum products.
“We are going to levy a tax rate that is reasonable compared to other EAC partner states” he emphasized, adding that government was in the process of revising most taxes that were raised.