Insurance players are the latest group to join the bandwagon of disgruntled business communities over the recent tax proposals for the financial year 2014/2015.
In a statement issued at the weekend, the Uganda Insurance Association (UIA) said the termination of the Value Added Tax on premiums would not only increase the overall cost of insurance but also impede the industry's growth.
"At 0.65 per cent, Uganda's insurance penetration is one of the lowest in the world," Deepak Pandey, the chairman of UIA, said in a statement.
"The introduction of an additional 18 per cent cost as VAT on insurance will further depress this low rate that has stagnated for the last five years."
Pandey said there were other taxes within the industry that were already depressing growth; any extra tax measures only mean that insurance will become too expensive for an ordinary Ugandan. He referred to VAT, insurance training levy, IRA levy, and stamp duty as some of the charges the industry already has to shoulder.
Insurance players join a couple of other sectors to oppose taxes that were announced in the 2014/15 budget. Private school owners and tour operators have opposed taxes imposed on them. In an effort to look for money to run the economy, Finance Minister Maria Kiwanuka announced a wide range of taxes, which rubbed some private players the wrong way.
According to Miriam Magala, the chief executive officer of UIA, last year's increment of stamp duty to Shs 35,000 from Shs 5,000 negatively affected uptake of insurance services because it became costly to own a policy. According to the UIA statement, players demand that the tax be deferred for a further 12 months for them to prepare for it.
Last year, the insurance sector grew by 30 per cent, with gross insurance premium hitting Shs 456.86bn, according to the Insurance Regulatory Authority's results released in April.
"Growth shows that Ugandans are starting to have trust in the industry," said IRA CEO Ibrahim Kaddunabbi, while announcing the results.
"We need to work hard and bring new products to attract more people into the sector."
Kaddunabi noted that while life business grew faster than the non-life segment, it remained less significant in terms of the market share, with non-life taking three quarters of the market. Government didn't propose to terminate the VAT exemption on life and medical insurance in order to encourage more people to take up these life premiums.
Some insurance players say they need to do more to attract people, and not just look at the tax measures as the only hindrance.
"It is fundamental that the consumers are educated and given time to adapt accordingly, and that companies are essentially given time to duly manage their customers to avoid a decline in business," said Mr. Maurice Amogola, the chairman of the Uganda Association of Insurance Brokers (UAIB).
"We need to ensure that our customers come first even as these new taxes are introduced," Paul Mukasa, the chairman of the Uganda Association of Insurance Agents, said
UIA says the taxes are to be felt more in areas such as workers compensation and motor third party insurance, micro insurance, agricultural insurance and loan protection insurance.
Nevertheless, a survey released last November on risk management showed that many Ugandans resorted to informal ways of risk mitigation other than through insurance firms.
The 2013 Finscope report, Unlocking the barriers to financial inclusion, by the Economic Policy Research Centre, showed that many Ugandans, especially in the rural areas, borrow from friends and family, asking for donations from neighbours and relatives, and sell assets such as land, to deal with a specific risk.