Insurance companies forced to act as the taxman
The Industry, 6 December 2008
In spite of a recommendation made less than a month ago by IPART to remove the reliance of the government on insurance taxes which unfairly penalise those who take out insurance, the NSW government has announced plans to hit policyholders with an additional tax to fund the State Emergency Services.
"NSW should seek to reduce existing exemptions to help fund reductions in the standard rate of these taxes. In the longer term, it should aim to either reduce its reliance on revenue from these taxes, or eliminate these taxes by placing more weight on other more efficient taxes," stated the earlier recommendation issued to Treasury. Understandably the insurance industry has been taken aback by this additional tax which is due to come into effect July 1, 2009.
"The cost of insurance is a major reason many businesses are underinsured, but around a third of the cost of insurance to a small business is in the form of taxes. General insurers are rapidly being turned into tax collectors for both State and Federal governments" said the Chief Executive of Zurich Financial Services Australia, Mr David Smith.
“It is an imperative that small business is able to access affordable insurance to protect their interests should a catastrophe occur. Loading insurance premiums with punitive government taxes exacerbates the chronic levels of underinsurance across the SME sector. Tax reforms, aimed at removing the hidden costs of insurance, would significantly help in reducing non- and underinsurance across the SME sector.”
OAMPS Insurance Brokers Head of Strategic Development, David Wyner said “Plans by the NSW Government to fund the state’s Emergency Services (SES) by a levy on insurance policies will challenge businesses in an already difficult economic climate”
“The SES do a fantastic job for the community, but to ask businesses to fund their work to this extent is unfair, particularly when their main focus is on helping individuals,” Mr Wyner added.
National Insurance Brokers Association Chief Executive Noel Pettersen said “The IPART Review criticised taxes on insurance as a disincentive to properly insure, and said the fire services levy system is highly inefficient,”
“The NSW Government’s response has been to add yet another tax on top of the three already added to every premium, this time to fund the SES."
“The NSW Government can’t justify this additional impost on policyholders,” he said. “They already pay world record-level insurance taxes of up to 40 cents in the dollar for their homes and 60 cents in the dollar for their businesses."