NIBA has forcefully hit out against insurance taxes as the South Australian Government prepares to reform its tax system.
The SA Government has stated a willingness to consider radical tax reform, and called for public submissions on what needs to be done.
“NIBA firmly submits that the time for discussion as to whether insurance taxes should be reformed has well and truly passed,” NIBA CEO Dallas Booth says.
“Insurance taxes must be reformed – they are inefficient, inequitable, unfair, and contribute to levels of underinsurance in the community. Responsible risk financing should be encouraged by governments, not taxed as if it is an undesirable activity.”
In SA, insurance taxes increase the average premium by 20%. In doing so, they funnel close to $500m in revenue to the State Government, or close to 10% of its total tax revenue.
The SA Government has acknowledged the shortcomings of insurance taxation in its tax reform discussion paper.
“Taxes on insurance are amongst the most inefficient taxes levied by the government,” the paper states.
“However, revenue generated from these taxes is substantial (around $0.5 billion per annum).”
“For the State Government, the two most obvious replacement revenue sources are its property and payroll tax bases, although national tax reform may also provide an avenue for all Australian jurisdictions to move away from taxing insurance.”
Submissions close on 24 April.