Govt agrees to 'exempt' property and casualty insurance

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November 04, 2013

Lobbying by the property and casualty insurance sector has resulted in a decision by the government to also exempt this part of the insurance industry from VAT, in addition to the health and life sector, Guardian Business can reveal.

Speaking on Guardian Talk Radio's Morning Blend show on Friday, Ishmael Lightbourne, VAT consultant to the government, confirmed that the government has now determined that it will treat all insurance products alike under the new VAT regime.

"We had very good discussions with the property and casualty and health and life insurers, and all of them now are going to deal with as exempt, we hope, in terms of how they are dealt with, rather than vatable, which is something that they are asking for.

"The entire insurance industry now is going to be looked at as exempt," stated Lightbourne.

Sector participants had earlier described the government as "splitting" the industry, by opting to have health and life insurance treated as "VAT exempt" - with no VAT eligible to be added to premiums - while property and casualty would be "vatable."

This would have resulted in a direct 15 percent cost burden on insured individuals, leading to more uninsured drivers and property, suggested some in the sector. The VAT looked set to be added on top of a premium tax already levied on the sector.

VAT exempt, then, was seen as a "lesser of two evils" scenario, with some insurers noting that to be "zero-rated" - eligible to receive credits for VAT paid on inputs while also not charging VAT to consumers - would have been ideal. The government has indicated that zero-rated status will only be offered to exporters under the new VAT regime, given that VAT is a tax on consumption and those consuming their products will be abroad.

On Friday Vibert Williams, managing director at the Netherlands Antilles General Insurance Company, said he had that morning heard of the possibility the property and casualty insurance may be made VAT exempt.

While emphasizing that until he "sees it on paper" he cannot be convinced this is the case, Williams said this should minimize the impact of VAT on costs to insured individuals.

"If it were true, and we don't know that it is yet, we haven't seen any documentation, but if it is, it would go some way towards easing a potential burden on the insured who would not have to pay a 15 percent on their premiums.

"That said, it just means all insurance companies' expenses are about to go up by at least 15 percent and some may still be forced to increase insurance premiums," said Williams.

Other property and casualty insurers could not be reached for comment yesterday.

However, Williams' comments reflect the concerns of many who have been placed in the "VAT exempt" category, including nonprofit organizations, who fear that while they will not have the additional cost to themselves and their customers of having to collect and remit VAT, they will face higher costs on their inputs that they - unlike VAT registrants - will not be able to claim credits for.

Within the property and casualty sector, such costs would involve VAT to be paid for lawyer's fees, adjuster's fees, cost of repairs to vehicles and contractors for repair of damages, for example.

Click here to read more at The Nassau Guardian

News date : 11/04/2013    Category : Business, Nassau Guardian Stories

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