New tax could hamper insurance penetration in Uganda, say insurers
Insurance players in Uganda have voiced their concerns over the recent tax proposals for the financial year 2014/2015.Insurance players in Uganda have voiced their concerns over the recent tax proposals for the financial year 2014/2015.
In a statement issued last week, the Uganda Insurance Association (UIA) said adding a Value Added Tax (VAT) on premiums would not only increase the overall cost of insurance but also impede the industry's growth.
"At 0.65 per cent, Uganda's insurance penetration is one of the lowest in the world. The introduction of an additional 18 per cent cost as VAT on insurance will further depress this low rate that has stagnated for the last five years," Deepak Pandey, the chairman of UIA, said, quoted by the Observer.
The UIA said the taxes will be felt in particular in areas such as agricultural insurance and loan protection insurance.
This could impact
access to finance in the country, as insurance covers are often used as collateral to access a loan.
Last year, the insurance sector grew by 30 per cent, with gross insurance premium reaching Sh456.86 billion (€128.7 million), according to figures from the Insurance Regulatory Authority.