The imposition of state taxes and levies on life insurance has worsened in the past seven years, according to an updated Financial Services Council report.

The council’s first and second reports on Australia as a global financial centre are written by former Macquarie Group deputy chairman Mark Johnson.

The first report recommended all taxes and levies on life insurance be removed, but no such move has eventuated.

“There is no consistency in the application of these imposts across the states,” his latest report says. “These state taxes add significantly to the cost of insurance, especially for those businesses operating at a national level.

“They are undoubtedly a factor contributing to underinsurance, with consequent increased demands on the public purse.”

The latest report says such taxes are a significant source of revenue for states, and any reform will take place only as part of a much broader tax review.