"Our industry is saddled by high taxes – one of the highest, if not the highest in the region," said Tan. The new VAT law, which will be raised to 12 percent next year, will add to insurance pricing eventually, she warned.

There are three major sources of taxation against insurance products. These are taxes imposed once premiums are paid, when investment incomes are earned; and thirdly, when total corporate incomes are reported.

"There are some gaps between how the BIR (Bureau of Internal Revenue) interprets the law on DST and what the same law obviously means to us," said Tan. She is referring to the DST, which is charged to insurance companies. "While we understand the government needs to raise more money, the law is the law."

The industry’s development has been "stifled" because of the excessive tax burden.

The current tax treatment puts Philippine life insurers at a disadvantage as their products become more expensive. For example, local insurers complain that "moneyed Filipinos" will rather buy their dollar denominated policies in other countries where the premium rates are considered much better.

"(If this continues) it will result to actual capital outflows and will negate government’s drive to attract long term capital into the country," the Philippine Life Insurance Association, composed of 38 members, said earlier.

To help the industry expand its business and improve income, insurers insist that allowing its proposed tax reprieve will not affect the government’s collection efforts but rather increase the tax source.

However the Department of Finance, which collects at least P5 billion in taxes from the industry, is not inclined to give it up.