Abolishing transactional taxes, including stamp duty on insurance, in favour of increases to payroll and land taxes would provide the South Australian Government with a much needed financial boost, according to the Insurance Council of Australia (ICA).

The inquiry into SA’s tax system, which was launched in September, follows numerous state and federal tax reviews – including the exhaustive 2010 Henry Inquiry – in seeking the most efficient and fair system for the state’s taxpayers.

Numerous problems with SA’s taxation system have been highlighted in recent months, including the state’s high land tax and stamp duties and low payroll tax bills, which are second only to the ACT’s.

Payroll tax exemptions are also among the highest in the country, with more than half the state’s revenue base lost to exemptions.

Research conducted by Deloitte Access Economics for ICA shows taxes on motor vehicles, insurance and conveyances were the least efficient in the South Australian system when benchmarked against Commonwealth taxes such as income tax and the GST.

“ICA contends that the unique economic and demographic challenges faced by SA, and in particular, the rapid ageing of the SA economy vis a vis the rest of the Australian community, presents a set of circumstances that mandate a need for structural taxation reform,” an ICA submission to the inquiry says.

“The need for long-term, secure and efficient tax bases… necessitates that SA commence a path away from taxes on transactions such as stamp duties and towards those taxes that provide secure sources of income.”

The research argues that SA could abolish stamp duties on insurance and raise or remove exemptions on payroll tax without any loss of state income. It says the value of the reform package to remove insurance stamp duties would cost $371 million.

“The analysis confirms that the removal of transaction taxes for the less mobile state taxes of land and payroll [would] generate economic gains to SA and with that a revenue boost,” the Deloitte report says.

“This suggests that there are clear benefits to SA for engaging in tax reform independently of what reform processes are under way at a national level.”

ICA wants all taxes on insurance abolished by 2015.

“As the experience of the ACT and Victoria has proven, abolishing insurance taxes is imminently achievable and supported by stakeholders and the broader community,” the ICA submission says.