In the Tuesday meeting, parliamentarians approved an article of the VAT Bill that includes tax breaks for life insurance, insurance coverage for agricultural products and complimentary medical insurance policies, the parliamentary news website ICANA reported.
This decision comes amid insurance companies' complaints over the negative impact of taxes on life insurance policies. VAT in Iran is fixed at 9%, according to Financial Tribune.
Insurers say that without exemption from VAT, they cannot meet targets envisioned in the Sixth Five-Year Economic Development Plan (2017-22). The long-term plan stipulates that the insurance industry should reach a penetration rate of 7% by 2022.
The ratified article, however, does not include other insurance categories. Some experts see this a hurdle to expanding the role of the insurance industry in Iran's economy, especially in improving the business climate, creating jobs, providing assistance during natural disasters, financial inclusion, supporting the aging population and safeguarding the environment.
Insurance companies generated 66 trillion rials ($584 million) from selling life insurance policies in the last fiscal year -- up 42.3% compared to the year before.
The share of life insurance is projected to reach at least 50% of the industry’s total premium. Life insurance now accounts for about 14.5% of the total premiums.
In the draft budget for the current fiscal year that ends in March 1,400 trillion rials ($12. 5 billion) has been projected in tax revenue.
Given the budgetary constraints, increase in tax revenue is seen as critical for paying the government’s permanently increasing bills and plugging its ballooning budget deficit.