IAG CEO Mike Wilkins has delivered a rare public censure of insurance levies as pressure mounts on state governments to drop the fire services levy (FSL) system.

The forthcoming release of the Henry tax review is giving the insurance industry hope those states with a levy on insurance products will move to a property-based tax to fund fire services.

Mr Wilkins told the Australian Financial Review last week the Henry tax report is a “once in a generation” opportunity to compel state governments to shift the tax burden.

“It hasn’t been seen as a very sexy topic,” he said.

Only NSW, Victoria and Tasmania still charge a levy on insurance. Premiums in those states pass through three tax filters: the FSL, GST and finally stamp duty. NSW adds a State Emergency Service tax from July.

IAG released a fact sheet last month showing the cost of insurance taxes in fiscal year 2008 was $4.25 billion.

Insurers have fought a long battle with state governments over the FSL, albeit with some small victories. WA introduced a land-based tax in 2003 and has since experienced a drop in insurance costs and underinsurance.

The Insurance Council of Australia, of which IAG is a member, rarely elevates insurance taxes to the public stage, but says it works behind the scenes and through submissions to state and federal tax reviews.

IAG told the Federal Government tax review the fire services levy is “poorly targeted” and “inequitable”.