The Victorian Government is ignoring its vital country constituency with legislation designed to keep its insurance taxes at world-record levels.

The decision to go ahead with legislation follows last month’s Victorian Supreme Court decision that Royal & SunAlliance was not required to pay stamp duty on “that portion of the premiums received which is designated for payment of GST”. In other words, you don’t have to calculate the stamp duty on top of the GST.

Although the decision will be appealed by the Commissioner of State Revenue, the Government intends changing the legislation to make sure the entire premium is subject to stamp duty.

Victoria’s Treasurer, John Brumby, said this revenue funded “many vital services” and the State Government would act to ensure it was fully protected. “Had stamp duty not been GST-inclusive in relation to a number of taxes, there would have been an overall net loss to state revenue,” he said.

The attempt to tie stamp duty revenue to important government programs ignores the fact that rising premiums have been delivering windfall profits into the Government’s coffers for the past 18 months or so. Mr Brumby is probably hoping that the opposition-dominated Upper House will regard the correcting legislation as a supply issue and let it through. The opposition is mindful of the fact that the Bracks administration governs through the support of marginal regional seats and several independents also holding regional seats. Its reaction to the dilemma over the next few weeks will be interesting.

In the meantime, NIBA Chief Executive Noel Pettersen has described the Government’s decision to introduce amending legislation as “most unfortunate”.

“The campaigning for change will continue,” Mr Pettersen said. “But we should remember that although Victoria is the worst example, taxes on insurance are an Australia-wide problem and can only act as a disincentive to insure.”