Insurers unhappy about Tax Schemes

The Ghana Government may be encountering furious protest from life insurers and consumer lobby groups if reports that IRS is considering levying income tax on lump-sum payouts from life insurance policies are confirmed.

A source from the Ghana Insurers Association (GIA) described the idea as “a fundamentally wrong signal” which would affect more than 15 million life insurance retirement in the light of the fact that the state pension scheme is evidently in difficulties. Ghanaians are still not investing enough in private pension and so it would be more appropriate tax levies on life insurance.

Sources say that the tax body itself is divided on the issue. The idea appears to have floated when tax authority members pointed out that life assurance premiums are not generally tax deductible in Ghana. If that perk were introduced, then the lump sum payout would have to be taxed, it was suggested.

Logically, the income-tax levied on the pay-out would not be higher than the initial tax breaks. Life assurance policies that pay out a lump sum are tax free after minimum period of 12 years. Policies which pay a monthly pension may also be affected.