By Evgenia Tzortzi - Kathimerini

The government’s favorable proposals for reforming inheritance tax, announced last week, open the way for a more rational regime regarding compensations through insurance contracts, as urged by the Union of Insurance Companies (EAE) at a meeting with Economy and Finance Minister Nikos Christodoulakis. Compensation in case of death, which today is taxed according to the scale for inheritance, constitutes one of several disincentives for the growth of the insurance industry. Such compensation is added to any other inherited assets, resulting in excessive taxation.

EAE has linked the issue with the government’s more general policy for the taxation of insurance products, where a spate of unfair levies are an obviously negative factor at a time when the industry has shown negative rates of growth in the last two years, despite its promising margin for growth. The total investments of Greek insurance companies amount to 4.4 percent of GDP, compared to 42 percent in the eurozone and 54.5 percent in the EU as a whole.

The prospects of Greece’s insurance industry are closely linked to its tax treatment, according to EAE, and the recent overhaul of the social insurance system makes incentives more important than ever if it is to survive with the help of private insurance.

Christodoulakis and his colleagues in labor and development have recognized the need for adjustments and it is projected that the issue will be tackled within the framework of the overhaul of the entire taxation system which has already begun. The Georgakopoulos committee which produced a report on the reform earlier this year also dealt with the issue, calling for more favorable tax provisions for the insurance industry.

High priority is placed on the abolition of the 2.4-percent stamp duty on premiums and of the 3.6-percent stamp duty on compensation, which amount to unequal treatment of insurance-savings products vis-a-vis other forms of deposit.

Also important is the abolition of the turnover tax, imposed at various rates on the various categories of insurance premiums; this is 20 percent for fire insurance, 4 percent on life insurance (for those under 10 years’ duration), while premiums in all other categories are subject to a 10-percent turnover tax.

EAE proposes the complete abolition of the tax, while the Georgakopoulos committee found it an “odd” option for the life insurance sector since the government wishes to promote its growth.

Tax breaks today amount to only 440 euros for every individual or group insurance contract. In the framework of the ongoing tax reform, EAE has reiterated its proposal for an increase in tax breaks for premiums paid for life, health or accident insurance up to 10 percent of the taxpayers’ total income; the 5 percent that applies today on the gross income of individuals insured under group policies, at a time when the sector is expected to supplement social insurance, is now seen as anachronistic. The possible loss of revenue from the higher tax break no longer represents an adequate excuse for the government, as the present policy is a disincentive to the growth of the industry and, more importantly, impedes the natural development of an increasing collaboration between the private and social insurance sectors.