DOFI tax payment doubt
Sunrise Exchange News, 11 April 2007
Stamp duty levies for direct offshore foreign insurers (DOFIs) have exposed regulatory inconsistencies, according to IAG CRO and Group Actuary Tony Coleman.
Speaking at the Insurance Council of Australia (ICA) regulatory seminar in
“Insurance is taxed very heavily, and in some states as high as products like alcohol or tobacco,” he said. “The industry needs to address the inequity and inadequacy of state-based taxes on insurance.”
Mr Coleman says the taxation arrangements for DOFIs are an issue for concern. A level playing field is desirable and there is a problem with inconsistency in enforcement.
“The problem is that while insurance policies sold in our market by DOFIs are subject to stamp duty, there is little in the way of enforcement mechanisms to ensure those taxes are actually paid.”
He says the rationale for prudential regulation and protection of consumers needs to be consistent.
Meanwhile, Federal Treasury Executive Director Markets Group Jim Murphy told the conference that state taxes on insurance have a causal link with non-insurance, and removing them would help more people to take out insurance.
NIBA CEO Noel Pettersen said yesterday it’s encouraging to see the issue of state-based taxes being addressed by a senior member of the Federal Treasury. “While we appreciate this is something that can’t be fixed overnight, pressure has to be kept on state and territory governments to address the damage their unfair taxes on insurance premiums are causing in the community.”
Mr Pettersen says Federal Treasurer Peter Costello also made some comments on the issue last week.
“Mr Costello said the states had ignored a recommendation from the HIH Royal Commission that insurance stamp duties be abolished, even though had higher taxes on insurance than any other country and this had been found to be one contributing factor in HIH’s failure.”
Mr Pettersen says Mr Costello also noted the state governments raise about $3.8 billion a year from insurance stamp duties.