The Bangladesh Insurance Association (BIA) suggested on Tuesday that gain tax on life policy bonus be scrapped immediately for faster insurance growth in the country.
Insurance penetration in terms of the GDP (gross domestic product) remains less than 1.0 per cent now.
The group of 76 life and non-life private insurers said the government has been realising 5.0 per cent gain tax on policy bonus given to policyholders per annum.
When a life firm makes a profit, it is supposed to distribute partly to policyholders in the form of bonus each year.
According to BIA leaders, such type of gain is being realised even from micro-policyholders in rural areas.
But such type of tax actually cuts benefits from policyholders' end, they said.
"We think such type of gain tax should be scrapped immediately," BIA president Sheikh Kabir Hossain told the media.
He made the call at a press briefing convened at BIA headquarters here to propose some tax-related issues for faster growth of insurance industry.
Mr Hossain said, "There is no example of the imposition of gain tax on life bonus in any part of the world."
Corporate tax on insurance firms should be reduced to 35 per cent from existing 37.5 per cent, he argued.
"Our revenue generation remained much low than banks, but we're paying the similar rate of corporate tax the banks pay," Mr Hossain said.
He said non-life insurers have been paying 15 per cent VAT (valued-added tax) for health-related products, although life insurers do not pay the same.
The BIA chief said insurance agents have been paying tax at source of their income accrued from commission.
"There should be a ceiling and, above it, tax should be imposed on the agents," he continued.
Mr Hossain was also critical of the 15 per cent reinsurance commission.
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