Tax Attack Successes. The campaign over insurance premium taxes continues, with some surprising results
Insurance & Risk Professional, August 2002
They might not like it, but state governments are being forced to re-examine their stance on insurance taxes. A campaign mounted by NIBA several months ago brought brokers and their clients together in raising awareness of the issue with businesspeople and politicians.
The premium taxes issue has been a thorn in the side of Australian insurance for many years. But the dramatic rises in premiums over the past 18 months saw the issue come to the fore again as a result of NIBA searching for ways to minimise the effect of the rises on clients.
“Brokers have been able to galvanise clients into action over the issue,” Chief Executive Noel Pettersen said. “The NIBA campaign hasn’t been the only influence forcing governments to reconsider their attitude, but it has been among the most successful ways to make them sit up and take notice.”
The insurance industry has also been hot on the issue for many years through a succession of Insurance Council actions. ICA continues to push the issue in discussions with politicians, with special emphasis on the fire services levy in New South Wales, Victoria and Tasmania.
The industry’s attempts to force change may be assisted by the HIH Royal Commission, which will address the issue of government imposts on the industry during the course of its investigations.
In the meantime, governments have become much more flexible about insurance taxes. On May 24 Tasmania became the first state to abolish stamp duty on public liability insurance policies. Premier Jim Bacon said the exemptions would reduce the cost of public liability insurance for community organisations and businesses.
New South Wales, Queensland and Western Australia followed with variations on Tasmania’s example. Queensland also decided to wipe stamp duty on public liability insurance only.
The cut announced by New South Wales Treasurer Michael Egan was by far the most dramatic, simply because it was so unexpected. In his June budget he announced the halving of the state’s 10% stamp duty on insurance premiums.
Western Australia finally announced the new emergency services funding system, cancelling the emergency services levy from next year. The new system is based on the gross value of the property and the levy will be collected through council rates. Commercial property premiums are expected to drop 33%.
Victoria has declined to get involved in the premium tax-cutting. Treasurer John Brumby has refuted any suggestions that the Government is making windfall gains through premium taxes.
The international and interstate comparisons of fire service tax rates being cited in the media are “typically misleading”, he said. “Adjusting stamp duties on insurance in response to fluctuating premium levels is a short-sighted and unsustainable approach to taxation and may affect the Government’s ability to provide vital public services.”
New South Wales’ Michael Egan told Mr Pettersen in a letter that he believes stamp duty on insurance and the fire services levy were never among the taxes set down for abolition under the agreed national tax reforms that accompanied the introduction of GST in July 2000.