Stamp duty: insurance premiums
Victoria Legislative Council Hansard, 17 April 2008
House: COUNCIL
Activity: Questions without Notice
Members: HALL; LENDERS
Page: 34
Mr HALL (Eastern Victoria) -- My question without notice today is directed to the Treasurer. I refer the Treasurer to the stamp duty paid by Victorians on property insurance. Could the Treasurer explain the logic and the fairness of stamp duty being payable on not only insurance premiums but also on the fire services levy and the GST which effectively equates to Victorians paying a tax on a tax on a tax?
Mr LENDERS (Treasurer) -- I thank Mr Hall for his question and his interest in tax and stamp duty. The first thing I would say to Mr Hall is that the concept he talks about is a concept that is a state duty paid upon the fire services levy or any of the inbuilt taxes, whether they are state or federal, and is a concept that was in place during the government he was a member of -- the Kennett government.
So if the concept is not correct, then it begs the question why Mr Hall was silent during the seven years he was part of that government because the concept of a state duty upon the fire services levy and all the other components was there during the seven years he was part of the government.
Mr Drum interjected.
Mr LENDERS -- Mr Drum says, 'No, there wasn't'. Mr Hall said to me, through you, President, the concept of a tax upon a tax, a duty upon the GST, which came in post the Kennett government, the fire services levy, which was there during the Kennett government, and embedded taxes, whether they be federal or state, which were there during the Kennett government.
He asked, 'What is the logic of it?', so I am opening up by saying what the logic was. There are several components of a householders insurance premium.
I got my household insurance premium notice last week, so I have seen the sort of bill that everyone gets. For a house in Carnegie you get the base premium, then you get the agent's commission and then you get a fire services levy -- and that is presumably the most controversial issue that Mr Hall raises.
The fire services levy is a charge on insurance companies to assist with fire brigades having greater resources so that they are available to ensure that houses do not burn down and insurance companies do not have to pay for houses to be replaced. It is a charge on the insurance industry. The rate is set by the Insurance Council of Australia and imposed on individual insurance companies.
As we know, it is a critical part of the funding of the Metropolitan Fire Brigade and the Country Fire Authority. I could not give the house the exact figures, but I am happy to take that on notice and say what they are. That is how it works.
Then you have the GST, which comes on top of that, and then state stamp duty, which is a duty that is applied -- as it always has in Victoria -- after all the other charges on insurance. It applied under former premiers Henry Bolte, Dick Hamer, Lindsay Thompson and Jeff Kennett -- and it probably applied under the last Country Party Premier, Albert Dunstan, although I stand to be corrected on that.
Mr Hall asks, 'How do you justify a tax upon a tax?', as he describes it. We justify charging duties on insurance premiums because that amount of money goes towards building the services in the Latrobe Valley and in Gippsland that Mr Hall wants. You cannot just wipe out a figure of the order of $1.1 billion -- I stand to be corrected on that; you cannot just wipe out that component of insurance taxes as a populist move, and then ask, 'How do you justify it?'. You justify it because it is a tax that has been in place under governments of all persuasions over a period of time.
You justify it because that is the way that you fund roads, schools, hospital, police, teachers and nurses. Yesterday in this house there was a debate in which it was argued that we should pay teachers more. You cannot pay teachers more if you slash 3 per cent off your budget.
Taxes are about priorities. Nobody likes a tax. As Winston Churchill once said, democracy is the worst form of government except for all the rest. In a sense, taxes are offensive. Each tax is the worst form of revenue except for the alternatives.
Mr Hall asked the legitimate question, 'How do you justify it?'. My response to Mr Hall's question is that we tax because we must provide the services our community needs. That tax, at 10 per cent on the end cost of insurance premiums, has been unchanged -- I stand to be corrected on this -- since the days when Sir Albert Dunstan was the last Country Party Premier of Victoria. That is what the tax has been, and that is how we fund the things that matter to Mr Hall and me. I look forward to his supplementary question.
Supplementary question
Mr HALL (Eastern Victoria) -- I ask the Treasurer if he has calculated the cost to the budget if stamp duty were applied only to the insurance premium and not also to the fire services levy and the GST.
Mr LENDERS (Treasurer) -- I am not going to comment specifically on any work done by myself or the Department of Treasury and Finance on the preparation of budgets. I am not going to rule anything in or anything out.
An honourable member interjected.
Mr LENDERS -- People are saying that that is not what he is asking. Mr Hall asked me had I done calculations on that. I am happy to say to the house that this government commissioned the Harvey tax review -- I think it was in 2000 -- which reported back extensively on tax, and the government considered a range of options.
This government also responded, again in the last several years, to a review on the whole issue of the fire services levy, how that was done and the whole tax issues that went with that.
I am confident that modelling has been done on that, and it is quite obvious that it would be an amount that, if it were to be reduced, would have to then be weighed up against fewer schools, fewer hospitals and fewer wage rises for teachers, which were near and dear to Mr Hall's heart yesterday.
We can have an ongoing discussion about whether the fire services levy is appropriate to be there or not. Mrs Petrovich, I think, raised this issue with me the other week on the adjournment, and I raised with the house then some of the issues on the fire services levy. They are difficult issues.
Different jurisdictions have taken different responses, but the jurisdictions that represent 60 per cent of the Australian population have consistently said that a fire services levy is the least inequitable way -- which is probably a better way of putting it -- of paying for those fire services.
That is a legitimate debate. If Mr Hall has a policy position on behalf of the coalition that we should put a poll tax in place or introduce some other form of tax or cuts to remove the fire services levy, he is entitled to do that, and I would welcome the robust debate that would follow it.
But we will always look at the best forms of raising revenue, because revenue is such a critical part of the targeted service delivery and the targeted infrastructure spending that I alluded to in my earlier answer. I welcome Mr Hall's question, and I welcome the debate.
This debate is an important part of getting the parameters right for making Victoria a better place to live, work and raise a family.