Insurance taxes battle continues
Sunrise Exchange News, 12 December 2007
The industry’s battle against the inequitable state-based taxes on insurance has been an issue for years, but 2006 saw the issue gather greater public recognition. As policyholders in several states witnessed increases in these taxes, there was much lobbying from industry groups and even federal politicians.
ICA had much to say about the issue, as well as various state Opposition leaders and Assistant Treasurer Peter Dutton.
However NIBA really got behind the issue this year and launched an intensive “Say no to insurance taxes” campaign. A section of the NIBA website was created to explain the impact on policyholders. State and territory imposts are among the highest insurance tax rates in the world, with levels equivalent to the so-called “sin taxes” on alcohol and gambling.
The website also encourages consumers to write to their state and federal members of parliament and express their ire.
As the campaign gathered pace Mr Dutton said the states and territories had to be reminded about the HIH Royal Commission recommendation for the abolition of state-based insurance taxes.
He said the Federal Government “has asked, and our request remains valid, that the state and territory governments remove stamp duties and fire services levies on insurance products. I am sure these taxes prevent some families and businesses from taking out appropriate insurance cover and, in some cases, any cover at all.”
State and territory governments raised about $3.6 billion from insurance taxes in 2005/06, an increase of 50% on 2000/01.
In May the Victorian Government announced legislative changes that came into effect on July 1 requiring insurers to charge FSL on any discount or reduction in gross premium as a result of using “net rating”. There was no industry consultation, and informed sources say the scheme has been shown to be unworkable.
NIBA lobbied heavily about how the change would be implemented, and the Victorian fire services authorities agreed that net rating should not be applied where the broker is only remunerated on a fee-for-service basis.
In June, the NSW Government increased taxes on insurance again. The FSL for commercial fire, ISR, consequential loss and contractors’ all risks increased two percentage points to 36%.
About four months later the Victorian Government announced an FSL increase of 4% for rural businesses. The new FSL figure of 44% surpasses all other imposts.
Victorian metro businesses are subject to a 50% FSL which, with other taxes, adds about 80% to their base premiums.