VAT exemption decision lauded
22 July, 2021, 6:00 pm
The Fijian Government’s decision to grant a value added tax (VAT) exemption for premiums on climate and disaster risk parametric insurance products will provide financial relief to low-income households and small businesses at a time of economic distress because of the COVID-19 pandemic.
According to a statement from the United Nations Capital Development Fund (UNCDF), the exemption announced during the national budget address last Friday was welcomed.
“To support this groundbreaking initiative, VAT exemption will be provided to all climate and disaster risk micro-insurance products,” said the Attorney-General and Minister for Economy, Aiyaz Sayed-Khaiyum.
“By making these products more affordable, we extend them to low-income and vulnerable sectors previously beyond the reach of mainstream insurance.”
A 2020 UNCDF study on the ‘Economic Impacts of Natural Hazards on Vulnerable Populations in Fiji’’ had highlighted that insurance was an important tool for managing risks associated with natural hazards.
As per the statement, the UNCDF, through the Pacific Insurance and Climate Adaptation Programme (PICAP), had developed the region’s first parametric micro-insurance product which was being rolled out to cover smallholder farmers, fishers and market vendors in Fiji.
The micro-insurance product, developed by PICAP, was stated to have been piloted to initially cover 500 sugarcane, rice, coconut and root crop farmers, fishers and market vendors.
This would then be scaled up to cover 1000 beneficiaries before the start of the 2021/2022 cyclone season in November as it would provide immediate post-disaster cash relief to beneficiaries and support Fiji’s, as well as the region’s, efforts to build financial resilience among low-income households.
PICAP programme manager Krishnan Narasimhan said the VAT exemption on parametric insurance premiums was a landmark policy initiative and they were grateful to the Government for accepting their submission in this regard.
“It will directly benefit insurance customers, in particular small-holder farmers, fishers and market vendors, as they save on the tax component of insurance premiums and in these challenging times, that is indeed a big saving,” he said.
“This announcement also sends a strong signal to the insurance industry and the private sector that the Government is highly supportive of this important initiative and will catalyse the market towards innovation.”
PICAP was said to receive its financial support from the governments of New Zealand, India and Australia and the Fiji-based initiatives were also supported by the Climate and Energy Fund of the Government of Luxembourg.