The actuarial tax debate

19 July 2004

Insurance players reaction to the imposition of service tax are mixed, says Venkatachari Jagannathan

Chennai: Even as the CEOs of life insurance companies and the president, Actuarial Society of India (ASI), Liyaquat Khan, have expressed their opposition to the finance minister's proposal to bring the life insurance sector under the service tax net (See Insurance at a premium and ) there are industry experts holding contrary views.

Says R Ramakrishnan, a consulting actuary and former executive director, Life Insurance Corporation of India (LIC) and member, Malhotra Committee on Insurance Reforms and chairman, Reserve Bank of India's advisory group on insurance regulation, "There is nothing wrong in imposing some additional tax on life insurance. When compared to other countries, the rate of income tax in the case of life insurance industry in India is quite low."

Continuing, he makes an interesting observation, "And even this is not being paid properly by private players and no action seems to be taken for that. The amount of tax rebate availed by life insurance policyholders is far higher than the taxes collected from the insurers."

But actuaries like Heerak Basu of Watson Wyatt hopes, "Given the extent of under insurance in the country the government may wish to revisit this proposal."