The Federal Government has put insurance taxes back on the national tax reform agenda, saying it’s an inefficient way to collect revenue.

The decision to include the state-imposed taxes in the discussion paper for its October tax forum examining Australia’s taxation system has been hailed as a positive step towards making insurance more affordable.

The Government says the states have taxes on almost all general and life insurance polices, and “in comparison to other countries, Australia has high taxes on insurance”.

“Insurance taxes have been a growing source of revenue for the states, raising about $4.6 billion in 2009/10.”

The paper notes that while the taxation rate hasn’t risen, revenue has due to increased premiums.

“Insurance taxes are an inefficient way of raising revenue and can disproportionately impact on some sections of the community, such as those on low incomes,” the paper said.

“Increasing the price through the imposition of a tax on insurance premiums will result in some people either not insuring or underinsuring.”

NIBA CEO Dallas Booth told insuranceNEWS.com.au the association is “delighted with the move to include insurance in the taxation review.

“Insurance is a community benefit and should not be subject to penalty taxes.”

The Insurance Council of Australia (ICA) told insuranceNEWS.com.au it “supports the recommendations of the Henry Tax Review on insurance taxes and looks to the tax forum as being the pathway towards implementing this recommendation”.

“ICA supports the research produced by the Finance Industry Council of Australia setting out the significant economic benefits to Australian households from the reform of state transaction taxes.

“This research also provides the tax forum with alternative revenue sources for removing all stamp duties including a better payroll tax system, improved land taxes and adjustments to the GST.”

Mr Booth says NIBA is happy to work with Treasury “to find a better way” of generating revenue for the states.

The tax forum will be held on October 4-5. There will be 48 participants and 21 observers, with a further 56 participants and five observers from organisations including ICA selected by Treasury.

A further 52 participants and 20 observers will be selected through an expressions of interest process, which is now open.