Inefficient insurance stamp duties should be removed and replaced by an increase in goods and services tax (GST), Taxpayers Australia says.

Its report, compiled by its subsidiary the Taxpayers Research Foundation, is the latest to conclude that insurance taxes lead to underinsurance or non-insurance, “which is to everyone’s detriment” but especially impacts low income groups.

The problem, as ever, is how the states would make up more than $4 billion in lost revenue.

The report criticises the Insurance Council of Australia’s suggestion to increase local government rates, as “the revenues would be diverted from the state/territory governments to the local government level”.

It instead recommends replacing insurance stamp duties with a 0.75 increase in the overall GST rate, with the extra funds withheld from the current allocation formula and state governments fully reimbursed.