The Financial Services Council (FSC) has called for the abolition of state stamp duties on life insurance.

In a submission on the Federal Government’s tax white paper, the FSC says the duties are “the most distortionary and inefficient in the economy and have a direct impact on levels of underinsurance in the community”.

The FSC has asked life insurers how much stamp duty they pay, because the figure is not included as a separate item in state government budget papers.

It received responses from 80% of Australian life insurers, showing the amount of stamp duty paid last year was $377 million. The FSC has estimated an amount for the 20% that did not reply, resulting in an overall sum of $453 million.

“This has grown by a staggering 84% in the past five years,” the submission says.

The FSC also says complex state-based revenue assessments for stamp duty are a productivity drag for life insurers.

“Attempts to have a ‘uniform’ methodology for the raising of the state tax have failed on a number of occasions, and Australia is one of the few mature economies that taxes life insurance and life riders instead of giving a tax deduction,” the submission says.

“Under current arrangements there is little incentive for the state and territory governments to ‘go it alone’ with respect to abolishing inefficient taxes.”

The FSC says while some state governments have considered abolishing stamp duty on life insurance, a lack of alternative revenue has put them off.

In Victoria and the NT recent moves actually increased the amount of duty raised.