Insurance tax campaigner and LMI Group MD Allan Manning says New Zealand should reconsider its fire services levy (FSL) following the latest series of earthquakes.

He says there is good progress on abolishing the tax in Australia, with only Tasmania sticking to the levy system now that NSW is undertaking a switch to a property tax-based levy collection system.

But despite New Zealand having recently reviewed fire service funding, the levy there remains insurance-based.

Under new plans announced last month, the New Zealand Fire Service, National Rural Fire Authority and 38 other rural fire authorities are to become one organisation from next July 1.

And Fire Service Commission Chairman Paul Swain says the transition will be achieved by increasing the levy by about $NZ36 ($34) a year for the average homeowner.

Professor Manning says that he “could not believe that while Australia has almost got rid of FSLs in all states, the New Zealand Government elected to increase it by a staggering 40%”.

“What has been proven in Australia, time and time again, is that to impose tax on those prudent and risk-averse enough to insure is a disincentive, causing people to not insure, or if they do to underinsure themselves.

“The latest spate of earthquakes should be a stark reminder to the Government of New Zealand that it is in everyone’s interests – individual insureds, communities and the national economy – that people are fully insured in the event of a standalone fire or a major catastrophe such as an earthquake.”

The tax should be immediately removed from insurance and placed on property rates, Professor Manning says.