The Insurance Council of New Zealand (ICNZ) has again pushed for abolition of the fire and emergency services levy imposed on insurance policies.

Funding for Fire and Emergency New Zealand (FENZ) should instead come from general taxation, ICNZ says in a submission to the Tax Working Group’s interim report.

The working group is examining ways to improve the structure, balance and fairness of the tax system. 

Insurers are hopeful their submission will be seriously reviewed by the Labour Party-led government, because the major coalition member New Zealand First was sympathetic to the insurers’ views while in opposition.

“On equity grounds, a leading consideration of the Tax Working Group, we submit that the funding of FENZ is fundamentally unfair,” ICNZ says.

“Levying insurance makes insurance more expensive, due to the imposition of the levy itself and the costs of collection.

“Reducing the affordability of insurance potentially contributes to underinsurance, exposing households, communities and ultimately the Government to greater costs in the event of major disasters.”

ICNZ backs the working group’s assessment that not allowing deductions for expenses related to seismic strengthening of buildings is counter-intuitive. Deductions may be claimed if a building collapses in an earthquake.

“Given the seismic risks prevailing in much of New Zealand, it is important for buildings to be strengthened to reduce the potential loss of life from a major earthquake,” ICNZ says. 

“More resilient buildings will also generally be easier to insure. The tax system should not disincentivise building owners from conducting earthquake strengthening, and so we support the working group giving further consideration to how to ensure tax policy is supporting the Government’s disaster risk management agenda, rather than working against it.”

The working group will submit its final report by February.