The Tasmanian Government has increased insurance taxes in its 2012/13 Budget as the state looks for other sources to compensate for falling revenue.

The rise has been criticised by Insurance Council of Australia CEO Rob Whelan, who says the increase will raise the average household’s cost of insurance on a home and two cars by $31 to $155.

“The Insurance Council, along with other interested stakeholders, engaged in extensive consultation with Tasmanian decision-makers throughout 2011 on ways to improve the Tasmanian state tax base,” he said. “This measure runs counter to that process.”

Insurance now accounts for 7.5% of Tasmanian taxes, up from 6%.

Stamp duty on general insurance premiums will rise from 8% to 10% from October 1, raising an extra $9.4 million in 2012/13 and $13.1 million in its first full year of operation.

Duty on compulsory third party motor premiums will rise from $6 per registration to $20, generating an estimated extra $6.6 million in 2012/13 and $8.8 million the following year.

The Government says the duty has not risen for many years and is relatively low in absolute dollar terms.

The increase in general insurance and motor taxes means total insurance duties will rise from a budgeted $51.6 million this financial year, to $70.9 million in 2012/13 and $79.4 million in 2013/14.

The Budget papers show the insurance fire services levy is expected to raise $16.2 million in 2011/12, $16.4 million in 2012/13 and rise by $200,000 every year until 2015/16.

The insurance levy will contribute to total fire services levies of $56.9 million in 2012/13, up 3.8%, derived from insurance policies, council taxes and a levy on motor vehicles.

Premier and Treasurer Lara Giddings says the increase in the stamp duty on insurance premiums will bring Tasmania’s duty into line with most other states. Victoria’s tax is 10% and the NSW tax is 9%.

The Budget papers note that insurers can pass the cost on to policyholders and says that if policyholders bear the full impact, they will incur a 1.9% increase in the total cost of insurance and taxes.

The Motor Accidents Insurance Board dividend is expected to fall from a budgeted $20.9 million this year to $8.4 million in 2012/13, reflecting the global downturn and the five-year moving average calculation used.

Mr Whelan says the increase is inconsistent with the Henry Tax Review recommendation calling for insurance taxes to be removed because they are among the most inefficient taxes.