The Association “Insurance Business” (ASB) opposes the increase of income tax, which is included in the draft law No. 11416 “On Amendments to the Tax Code of Ukraine and other laws of Ukraine on the peculiarities of taxation during martial law”. In the opinion of the ACB, which its representatives made public during the meeting of government and business representatives, the bill creates conditions for disproportionate pressure on bona fide businesses and employees. At the same time, the new type of turnover tax will complicate the already complicated administration of taxes and fees, creating new corruption risks.
In addition, the draft law lacks measures to combat the shadow economy and measures to improve the efficiency of the State Tax Service. Such factors will lead to discrimination of bona fide business and contribute to the growth of the shadow economy, the Association’s website says.
In addition, the developers of the bill do not take into account the negative consequences of its adoption, which will be in the reduction of business activity, which will lead to a decrease in the total taxable base, an increase in the risks of shadow economy and the introduction of various tax optimization schemes, which automatically raise the risks of corruption, according to the ASB.
Vyacheslav Chernyakhovsky, Director General of the Insurance Business Association, speaking at the meeting, noted that the insurance market already bears the burden of double taxation: 3% of gross insurance payments and 18% of income tax on a common basis.
“Our Association has conducted research on the basis of insurers’ reporting data for 2023, made public by the National Bank of Ukraine. We proved on figures that 3% tax on income means more than 35% on profit. This will have a particularly negative impact on those life insurance companies that are engaged in accumulative life insurance”, – warned Chernyakhovskyi.
According to him, if this is extrapolated to the economy as a whole, the introduction of an additional 1% tax on income in the form of a military levy corresponds to an increase of 12 percentage points in corporate income tax on the general taxation system, which would correspond to a general rate of over 30%.
Ukrainian business calls on the government and people’s deputies to take into account the proposals of the business community, to hold a professional discussion of alternatives to fill the budget and possible cuts in expenditures and to jointly work out a decision on the sources of budget revenues, the report says.
The Association “Insurance Business” (ASB) appealed to the deputies of the Verkhovna Rada with a request to postpone the deadline for bringing the activities of insurance companies in line with the requirements of the law “On Insurance”, according to the information of the association. According to the new version of the law “On Insurance” adopted on November 18, 2021, insurers must bring their activities in line with its norms until July 1 this year
“We have prepared to the members of Parliament a very reasonable proposal to postpone this deadline to January 1, 2026,” – said the general director of the ASB Vyacheslav Chernyakhovsky.
He pointed out that during the preparation and adoption of the law it was planned that all the changes stipulated by it would be introduced under normal conditions of a relatively stable political and economic situation. But three months after its adoption, Russia’s full-scale military aggression began.
“It is clear that such cardinal changes are impossible in the new conditions of war and the struggle of the whole country with the biggest crisis in its existence,” he emphasized.
In support of this, Chernyakhovsky cites the following facts, in particular, the fact that the vast majority of NBU regulations were adopted in the last decade of December 2023, of which 10 NPAs have an ultra-high level of influence on all business processes of insurers. The consequence of these changes in legislation and regulatory framework is the need to update all internal documents of insurance companies (more than 100 documents with a total volume of more than 1 thousand pages), development of new insurance terms and conditions instead of insurance rules, forms for all insurance contracts, new software, etc.
“Based on this, insurers actually do not have the technical and physical ability to implement all these cardinal changes for the first half of 2024, which also accounts for the compilation and submission of all annual reports to all government agencies, the audit of financial statements, owners’ meetings, etc.” – is noted in the report
As confirmation of the data of the survey conducted by three insurance associations (ASB, LSOU, NASU) in April 2024 on readiness for the new norms of the law, which showed that out of 59 insurance companies that participated in the survey (61% of the total number of companies in the market, which own 86% of the total amount of premiums), only 20% believed that they will be fully ready to complete the necessary modernization of their activities before the date of entry into force of the requirements of the new law.
The Law “On Insurance” also introduces new capital requirements: the minimum amount of which is raised to UAH 32 mln. or UAH 48 mln. depending on the classes of insurance activities and regardless of the size of business and liabilities of the insurer, which negatively affects primarily insurers with Ukrainian capital, the report says.
“Such requirements put in unequal conditions small (mainly with Ukrainian owners) and large insurance companies. It is especially difficult to fulfill them to regional insurers, in particular, working in the regions most affected by Russian aggression: Zaporizhzhya, Kharkiv, Chernihiv and Odessa regions”, is noted in the message.
Bulgaria’s Euroins Insurance Group (EIG), a large independent insurance group in the Central and Southeast Europe, is acquiring the Ukrainian travel insurance business of Munich Re’s Ergo – ERV Ukraine (Kyiv). “The companies have signed acquisition agreements. The deal is expected to be finalized after receiving approval by the regulatory authorities,” EIG said in a statement. The agreement provides for further cooperation between EIG and ERGO, including the transfer of know-how of ERV and the opportunity for EIG to sell travel insurance products under the ERV brand or a model of joint branding in Ukraine and other countries where EIG is present.
According to the release, ERV Ukraine is the second largest provider of travel insurance in Ukraine with a market share of 10.7%. In 2017, almost 627,000 customers were provided with the company’s services.
“The acquisition of the ERGO insurance business in Ukraine is in line with our strategy of expanding and diversifying our portfolio in Eastern Europe and strengthening our position as the leading insurance group in the region,” EIG said citing CEO Kiril Boshov.
According to him, ERV Ukraine will be kept as a separate company outside the Ukrainian EIG subsidiary Euroins Ukraine, in order to concentrate efforts on selling travel insurance products.
“We are very pleased that EIG has signed the acquisition agreement, including far-reaching sales cooperation, which helps us to enter new markets and make our sales even more powerful,” Chief Executive Officer of ERV Richard Bader, a travel insurance specialist at ERGO, said.
BULGARIA, EUROINS, INSURANCE BUSINESS, INSURANCE GROUP, MUNICH, RE'S ERGO
