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Industry backs latest call to drop insurance taxes

The Insurance Council of Australia (ICA) has backed a Grattan Institute report urging state and territory governments to ditch insurance stamp duties and emergency services levies.

Insurers have been campaigning for more than 25 years for the removal of stamp duty systems, including insurance-based fire and emergency services levies, saying they are counter-productive. Inquiries into Australia’s taxation system have also criticised stamp duties on insurance products.

“Broad-based taxation remains the most economically effective, equitable and efficient method to fund Australia’s state and territory governments,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.

“A broad-based property levy would encourage adequate take-up of insurance and be a more efficient and certain way of collecting revenue compared with insurance duties, which in essence penalise policyholders for effectively managing their risks.

“The Insurance Council therefore strongly submits that the interests of all states and territories would be best served by abolishing their insurance duties.”

Abolition of state and territory taxes on insurance would allow Australians to take out an extra $36 billion in cover for their homes and household assets, ICA says. It would also boost the economy by more than $500 million.

As for insurance levies to fund emergency services, Victoria, SA and WA have shown it is possible to fund emergency services through a property levy instead of insurance-linked duties.

The Grattan Institute report says NSW and Tasmania are the only states to retain fire service levies, raising about $900 million annually.

Scrapping the taxes would leave residents in the two states about $430 million better off.

The institute describes insurance stamp duties as “economically destructive”.

“There is a big prize for tax reform,” the report says. “All taxes drag on economic growth, but some are worse than others.

“State governments rely too much on taxes that reduce growth more. Making state taxes more efficient would boost economic growth.”