Parliamentarians agreed in early summer to an amendment to the Business License Act which is considered as one of the “moderate tax increases” foreshadowed by Prime Minister Perry Christie during his budget communication.
The tax premiums from the insurance industry are in lieu of Business License fees.
Minister of State for Finance James Smith explained again this week that the insurance industry was considered for tax increases as there has not been any in that segment of the economy since 1986.
“In looking at just the normal growth in the economy over a period of time, some taxes had not been touched in a long time,” he said.
“In reviewing the tax regime, you look at it from many angles, different ways of determining the group of taxes to change and one of them is to first of all look at the history of the tax, when it was first introduced and how often it had been changed and how it effects the current market and insurance is one of those markets that was basically being overlooked over the years.”
He added, “I got something in the mail from my own car insurance telling me that my new rate includes a one percent government tax and I was saying to myself, ‘the taxes really applied to the holder of the insurance license and not for the public,’ but they’ve seemed to passed it on.”
Assistant Manager of the Property and Casualty Underwriting Department at J. S. Johnson Insurance company, Richard Parker, isn’t necessarily welcoming the tax increase, but he said he understands the government’s decision.
“I know our government is running a deficit and they’re looking at ways of producing more income,” Mr. Parker said.
Mr. Parker admitted that it is in the government’s best interest to collect a premium tax from insurance companies as opposed to a Business License fees.
“They would get far, far more revenue collecting for example two percent than asking for a $2,000, $5,000 or $10,000 payment upfront,” he said.
According to President of Bahamas First General Insurance Company Patrick Ward, some insurance companies have decided to absorb the tax increase without actually increasing premiums.
He said his company’s executives were still assessing the situation.
“We’re basically taking the position that we are trying to put in place a programme where clients are not asked to pay more than they were paying had the premium tax not been put into effect, but clearly it is something that is affecting all of our bottom lines,” said Mr. Ward, who added that his company has about 28 percent of the general insurance market.
Insurance firms were taxed almost $5 million in premium fees in 2002.
The Bahama Journal
