The European Chamber of Commerce in Taipei (ECCT) and the American Chamber of Commerce in Taipei (AmCham) added their voices yesterday to objections from the local life insurance sector over recommendations by the Tax Reform Committee on investment-linked life insurance policies.
“The tax levy recommendations would be bad for customers and discourage much-needed long-term savings,” the European chamber’s insurance committee said in a press statement.
The ECCT “strongly recommends that the Tax Reform Committee should reconsider its position and maintain current taxation practice,” the statement said, adding that unit-linked insurance makes an important contribution to the retirement needs of the nation’s aging society.
Chris James, chairman of the ECCT’s insurance committee, said the proposal “will possibly have a negative impact for the foreign [insurance] companies, which are currently revisiting their investment plans [in the local market].”
AmCham’s insurance committee said the tax proposals “will impose an extra tax burden on consumers, discourage consumer savings for family protection and retirement, damage the Taiwan insurance industry and is open to legal challenge.”
It urged the government to handle any proposed change to the taxation of insurance products through the legislative process to avoid violating the Income Tax Act (所得稅法), the Insurance Act (保險法) and the Estate and Gift Tax Act (遺產及贈與稅法).
Both chambers said investment-linked products offer customers flexible and cost-effective life insurance and savings as an alternative to the more opaque traditional products. The separate account provided by investment-linked products provides an extra layer of financial security for policyholders, who could otherwise lose their savings to other general creditors if an insurer were to fail, their statements said.
In most markets, unit-linked insurance products that meet defined criteria are still taxed as life insurance and investment proceeds accrued in the investment account are used to fund future insurance protection, which make them an integral part of the life insurance contract, the chambers said.
Local life insurers said yesterday that the committee’s new tax levies were unfair, even though high net worth clients with NT$30 million (US$910,300) or more in total assets were likely to feel the most pain.
Steven Lee (李怡輝), a product manager at Hontai Life Insurance Co (宏泰人壽), said the government should be fair and impose taxes on all capital gains, including those from share and fund investors, instead of singling out the proceeds of investment-linked policies.
Lin Chao-ting (林昭廷), a senior vice president of Cathay Life Insurance Co (國泰人壽), the nation’s largest life insurer, supported the Financial Supervisory Commission’s view that the new tax policy was flawed and would amount to double taxation.
The new policy would hurt sales of such policies, which have plummeted to a total NT$60 billion in premium income in the first half of this year from NT$465 billion in 2007.