Brokers hail Victorian government tax backdown
NIBA Media Release, 30 May 2007
The Victorian Government has abandoned controversial legislation introduced two years ago to impose an additional fire services levy on large businesses in the state, the National Insurance Brokers Association (NIBA) said today.
The abandonment brings to an end the Government’s “unworkable” plan to increase the fire services levy on policyholders whose property policy had a total insured valued greater than $50 million.
This tax, to take effect from July 1, was adopted after an independent panel described a previous policy to tax those with policy deductibles of $10,000 or more as “completely unworkable”.
The tax on deductibles – the gap a company will pay before an insurer covers the remaining amount of the claim – was rushed through Parliament in 2005 as an amendment to the Victorian State Emergency Service Bill.
NIBA Chief Executive Noel Pettersen said today the decision to abandon the legislation is a victory for common sense.
NIBA has consistently argued to the Victorian Government that the changes to the fire services levy were cosmetic, costly and of little overall benefit. “To redistribute about $2 million in a funding pot of $856 million would have cost the industry about $5.5 million in implementation costs and $300,000 in ongoing compliance costs,” Mr Pettersen said. “There was no benefit to the community at all.”
He said an expert committee headed by actuaries Taylor Fry rejected the system of taxing deductibles and instead recommended an increased levy on higher-value properties.
“Instead of continually tweaking a fire brigade funding system that is outmoded and flawed, the Victorian Government should adopt the recommendations of its own 2001 business tax review as well as the HIH Royal Commission and abolish the fire services levy system altogether.
“Taxing insurance products only allows people without insurance to escape making any contribution towards the cost of running country and metropolitan fire brigades,” Mr Pettersen said. “The fire services levy is an antiquated tax that most other states have already dropped in favour of community-based funding systems.”
The Western Australian Government replaced its fire services levy with a broader tax in 2002, following South Australia’s lead in 1999.
An independent report by Sigma Plus two years later found the change led to lower premiums and an increased number of people taking out insurance in
Western Australia. Home and contents insurance fell by about 13% while commercial property premiums were 15% cheaper in the year after the levy was lifted.
“Victoria has a new opportunity to review its fire brigade funding system and remove the enormous level of cascading taxes on premiums that have made
Victoria’s property insurance the most expensive in the world,” Mr Pettersen said.