Government tax review welcomed by industry

Government tax review welcomed by industry | Insurance Business

Government tax review welcomed by industry
The Insurance Council of Australia and NIBA have welcomed a Federal Government tax white paper, which highlights the ineffectiveness of taxes on insurance.

The white paper, entitled, Re:think. Better tax system, better Australia, highlights that insurance taxes are inefficient and leave those already vulnerable at further risk.

The white paper notes that some “modelling also suggests that insurance duties have fairly high costs because they discourage some households from taking out appropriate levels of insurance,” as taxes prove off-putting to those seeking insurance.

According to the in-depth white paper, “insurance taxes are among the most inefficient taxes in Australia.”

“Insurance taxes increase the cost of insurance to consumers and place a large burden on home insurance.

“They may lead to under-insurance or to people not insuring at all, particularly if householders are sensitive to price increases."

Insurance tax generates 8% of state and territory tax revenue compared with 31% from payroll tax and ICA CEO, Rob Whelan belevies that stamp duties and levies on insurance should be made a thing of the past.

“Tax on insurance is an issue in all states and territories, and the ICA acknowledges that all governments are under fiscal pressure. However, tax reform, which directly benefits consumers, must be a high priority for all governments,” Whelan said in a statement.

The ICA gives the example of New South Wales where taxes can add more than 40% to the amount paid by consumers but Whelan highlighted the cyclone-prone areas of Northern Queensland are at particular risk.

“Taxes on insurance are an incredibly inefficient and unfair way to generate revenue for governments, and these taxes also discourage consumers from being properly insured,” Whelan said.

“No discussion about insurance affordability in North Queensland can ignore the burden that consumers carry in taxes – state and federal taxes add 19.9 per cent to the price every household pays for their home, contents and vehicle insurance.”

NIBA CEO, Dallas Booth echoed Whelan’s sentiments, saying " insurance taxes have a major impact on affordability," which the Federal Government will try to bring under control with the taskforce set to work in Northern Australia which was also announced this week.