SECP proposes steps to promote insurance sector
For the first time, the Securities and Exchange Commission of Pakistan (SECP) has forwarded suggestions to the provinces for taking budgetary measures for promoting the insurance sector and outreach of capital markets across the country.
The proposals have been forwarded to all four provinces as many subjects were not the federal matter and under the domain of the provincial taxation authorities.
Since Pakistan has one of the lowest insurance penetration in the region, the regulator has proposed measures for the promotion of low-ticket insurance products and personal lines of non-life insurance business to serve the poor and most vulnerable segment of society. "...Micro-insurance products can play an instrumental role in the development of the insurance market in Pakistan," believes the SECP.
The regulator proposes restoration of historically available exemption from sales tax on life insurance, health insurance and reinsurance services.
The SECP has said that the imposition of sales tax on life insurance, health insurance and reinsurance services by provincial revenue authorities would severally hamper the insurance penetration in Pakistan, which is already on the lower side, for the following reasons.
The other proposal was to exempt provincial sales tax on personal lines on non-life insurance business. The SECP has also proposed to exempt personal lines of nonlife insurance business such as personal accident insurance, travel insurance and home property/household insurance from the provincial sales tax.
It has asked the provinces to revoke levy of stamp duty on the insurance services, and said that all the provisions related to stamp duty on insurance services should be removed from the Stamp Act 1899. It has been suggested that insurance agents be exempted from withholding/sales tax on their commission.
There were proposals for documenting real estate sector and promoting REITs structures by giving concessional stamp duty and transfer fees for transfer of property to and from REITs scheme.
The commission has also asked the provinces to streamline their jurisdiction issues related to provincial sales tax on services. The SECP has highlighted that the provincial sales tax is applicable on the management services including fund and assets management services.
The remittance outlook for South Asia in 2023 is highly uncertain, warns a new World Bank report, which says it is unlikely that the strong growth in remittances in the region in 2020 and 2021 can be sustained through 2023.
In Pakistan, remittances are projected to grow by eight per cent in 2023, while in India, it is expected to grow by 5pc in 2023 and Bangladesh by 2pc, and for Afghanistan, remittance flows will remain flat, according to the World Bank's latest report, Migration and Development Brief, released on Thursday.
Remittance flows to Pakistan increased at 20pc in 2021 to $31 billion, while in Bangladesh these grew by only 2.2pc to $22bn. Growth in remittances was powered mainly by government incentives, support from migrants to their families back home, and inflows intended for Afghan refugees in Pakistan.
High-frequency monthly data has marked a consistent downward trend since September 2021. Formally recorded remittances to Pakistan are likely to grow at 8 per cent to $34 billion in 2022.
In Bangladesh, except for a 24pc spike in March 2022 to mark the start of Ramazan, monthly remittance growth has been decreasing over the past eight months. Remittances are anticipated to gain 2pc in 2022. Remittances to South Asia grew 6.9pc to $157bn in 2021.