CZECH REPUBLIC: FinMin mulling introduction of special tax on insurers

21 March 2013 —
The Czech Finance Ministry is considering an introduction of a special sector tax for insurers if the state fails to meet budget targets, Deputy Finance Minister Radek Urban said Sunday in a discussion programme on the Czech Television.

The state's revenue from such a tax would be in the order of several billion crowns, Urban said.

"The possibility to introduce a sector tax on insurers is in the phase of considerations," he said.

Implementation of the proposal would require a very long time for preparations and would have to be discussed with insurance companies, according to Urban.

However, Urban did not rule out the possibility to introduce the new tax in the current election period. "The impact of sector taxes is, in general, a little less harmful than some other cascade-type taxes and the like," Urban noted.

The amount of the possible tax should be such so as its introduction makes sense for the state budget. On the other hand, this interference in insurers' economic performance should not endanger their further existence.

"This means it would be in the order of low single figures of billions of crowns," Urban said.

The tax would be calculated from the volume of assets or reserves, Urban said, but added this idea is still premature.

Special taxation of some economic sectors was in the past introduced by Slovakia and Hungary, for example.

Slovakia also introduced a special tax for insurers. A special contribution to the state budget is also paid by profitable companies operating in the energy sector, telecommunications, pharmaceutical sector, postal services, aviation and health care, for example.

In Hungary, a similar tax is paid by banks, telecoms companies and retailers, for example.

In contrast, the Czech government rejects a possible introduction of tax on financial transactions.

Introduction of the tax in 11 EU member states was proposed by the European Commission in February. Banks are to participate in costs related to the financial crisis through the tax.

The Czech insurance market continued to stagnate last year.

Insurers in the Czech Republic collected Kc115.5bn in premiums in 2012, a year-on-year drop of 0.1 percent. Life insurance increased by 1.9 percent to Kc47.4bn in 2012, while non-life insurance dropped by 1.4 percent to Kc68.1bn.

The biggest players on the Czech insurance market are financial group Generali PPF Holding (insurers Ceska pojistovna, Generali and CP Zdravi) with a market share of 33.1 percent and the VIG group (insurers Kooperativa, Ceska podnikatelska pojistovna and Pojistovna Ceske sporitelny) with a 29.1 percent share.

In terms of the total volume of billed premiums, the biggest year-on-year growth of almost Kc0.5bn was last year reported by insurer CSOB Pojistovna. The second biggest growth was recorded by Pojistovna CS, followed by Allianz.

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