Aggregate collection of consumption tax from large general insurance companies declined last fiscal year (FY), 2021-22, reflecting slowdown in their business as an impact of import restriction.
Industry insiders said almost all companies, irrespective of large and small, are bearing the brunt due to costlier dollar and decline in marine business as an impact of the global economic turmoil.
The revenue authority received nearly 2.0 per cent lower consumption tax or Value Added Tax (VAT) from six large non-life insurance companies last FY compared to the previous FY, according to data compiled by Large Taxpayers Unit (LTU) under VAT Wing of the National Board of Revenue (NBR).
In FY 2021-22, the NBR collected Tk 2.30 billion VAT from these six insurance companies, which was Tk 38 million lower than that of the previous FY, the LTU data showed.
The companies paid Tk 2.34 billion VAT in FY 21, followed by Tk 2.29 billion in FY 20, Tk 2.54 billion in FY 19, and Tk 1.78 billion in FY 18.
The government collects VAT at a rate of 15 per cent on premium of the insurance companies.
However, Green Delta Insurance Company Limited paid 17.25 per cent higher VAT in FY 2021-22, followed by Pragati Insurance Limited 2.53 per cent, and Reliance Insurance Limited 6.01 per cent - compared to those of the correspondent period.
On the contrary, Rupali Insurance Company Limited paid 37 per cent lower VAT last FY, while Sadharan Bima Corporation's (SBC) payment of consumption tax dropped by 0.46 per cent, and Pioneer Insurance Company Limited by 0.37 per cent.
SBC former managing director Syed Shahriyar Ahsan said the overall economic slowdown is reflected in insurance sector. Import and export declined last year along with fueling inflationary pressure.
Mr Ahsan, who is going to join Pioneer Insurance soon as the managing director, said some large companies managed to grow, as new group of companies launched their operation.
Md Imam Shaheen, Chief Executive Officer and MD of Asia Insurance Ltd, said import restriction and shortage of dollar affected the insurance business last year.
"Our insurance premium went down with the decline in opening of letters of credit (L/Cs)."
Decrease in premium income from marine insurance segment affected profit margin of the insurance companies, noted Mr Shaheen, who is senior vice president of the Bangladesh Insurance Forum, the lone organisation of MDs of the insurance companies.
In July, the Bangladesh Bank (BB) imposed 100 per cent L/C margin on import of cars, electronics, gold and other precious metals, readymade garments, pearls, furniture, leather products, jute products, cosmetics, decorative items, fruits, flowers, non-grain food products, and processed foods and beverages.
The NBR, on May 24, also imposed heavy tax on import of a total of 135 products, considering those as less important.
The move was taken to offset the country's dollar shortage and ease pressure on foreign exchange reserve.
Mr Imam further said the restriction on import of luxury products created a negative impact on the insurance companies' income, as marine business contributed its significant part.
Insurance penetration in Bangladesh fell in 2020. Both life and non-life insurance premiums were lower in 2020 than those of 2019.
Total insurance premium in 2020 fell by 3.1 per cent in nominal terms, according to a sigma report by Swiss Re Institute.
However, total gross premium of life and non-life insurance grew 8.45 per cent year-on-year to Tk 143.92 billion in 2021, according to the Insurance Development and Regulatory Authority (IDRA).
The Swiss Re Institute report said insurance penetration in Bangladesh in terms of GDP percentage declined to 0.40 per cent in 2020, the lowest among the South Asian countries, whereas India had 4.2 per cent and Sri Lanka 1.2 per cent.
Hong Kong had the highest insurance penetration of 20.8 per cent in 2020.
From January 1 to June 30, 2022, majority of the listed non-life insurance companies in Bangladesh posted lower profit. Fire, transport and marine are the major three segments of non-life insurance business here.