State politicians on both sides of the political divide have copped a caning from Assistant Federal Treasurer Mal Brough for heaping further taxes on insurance premiums. Last week the new NSW stamp duty rate of 9% on premiums – up from 5% – came into effect, hot on the heels of Victoria’s perplexing new Emergency Services Act.

The new NSW tax will boost the state’s stamp duty revenue on premiums from $415 million to $541 million – a 30% increase.

Mr Brough told Sunrise Exchange News the tax has been imposed by “a greedy Labor Government”, increasing what is already a tax on a tax, and undermining the positive work to put downward pressure on insurance premiums through “sensible reforms”.

“The New Premier, Morris Iemma, is walking in the footsteps of his predecessor [Bob Carr], double-taxing residents and showing that Labor can’t be trusted when it comes to budget management,” he said.

“It puts a big dent in people’s confidence when we’re trying to send a clear message that the insurance industry is being responsible. Frankly, the NSW Labor Government is not being responsible. It’s just a cheap hit on the insurance industry and those people paying premiums.”

But Mr Brough agrees more should be done by Liberal and National Party oppositions in the states. Both the new NSW tax and the Victorian law were enacted with barely a whimper from the state oppositions, which when they were in government also plundered premiums.

Encouraging new NSW Opposition leader Peter Debnam to be more proactive on tax reform, he said he should also “look carefully at this impost on insurance”.

“The reason I think the Labor Government has chosen it is because the insurance industry will get the blame for the premium increase.”

Victorian Opposition leader Robert Doyle also hasn’t been being proactive enough on the issue of tax reform, Mr Brough said. “I make no bones about it. Regional Victoria is paying 80 cents in tax for every $1 in premium. That’s totally unreasonable, and there’s no justification for it. The [Victorian Government] is imposing a tax upon a tax and it needs to be addressed.”

The Insurance Council of Australia (ICA) says the NSW increase pushes insurance taxes – stamp duty, fire services levy (FSL) and insurance protection tax ­– to $1.05 billion.

As a result, the average NSW householder will pay an extra $50 a year for typical home and contents cover, while small businesses will pay an extra $114 a year on a typical base premium for property insurance.

ICA Executive Director Alan Mason says the impact of the “tax on tax” effect means property owners will be the hardest hit, because the state government already charges stamp duty on top of the FSL and GST.

NSW policyholders contribute more than $440 million to metropolitan and rural fire services through the FSL.

“The high taxes are penalising people prudent enough to protect themselves and their property,” Mr Mason said.

A report commissioned by ICA from the Centre for International Economics has re-emphasised the fact that NSW is only second to Victoria in levying the highest property insurance taxes in the world. Both states tax insurance more than alcohol and gambling.

“It also found that insurance is price-sensitive,” Mr Mason said. “The high tax impost on policyholders is a significant cause of underinsurance and non-insurance, which in turn has adverse effects on the economy and drives more people to demand government assistance in times of disaster.”