Federal Treasurer Peter Costello has taken a swipe at the economic credibility of Labor state governments, calling on them to dump taxes on insurance products.

He singled out insurance levies and stamp duties among taxes he wants abolished, telling the Menzies Research Centre state policy conference in Sydney the states are squandering their share of GST revenue.

The issue of GST revenue is a favourite debating point for Mr Costello with state treasurers. He argues the states promised to abolish other taxes in return for the GST windfall, but they say no such agreement was made.

The Treasurer’s speech last week contained a rare mention of insurance taxes in particular as anathema to sound taxation policy.

“State taxes on insurance significantly add to the cost of insuring,” he said. “For example, in Victoria the added taxes and charges can be as much as 70% of the price of the risk premium.

“This clearly results in distorted market outcomes. It also results in poor policy outcomes, as lower-income earners risk significant long-term problems through underinsurance.

“The taxes on insurance fall heavily on those who can least afford to bear the risk.”