The Insurance Council of Australia has renewed its campaign against insurance taxes, after new modelling showed that abolishing inefficient stamp duties on insurance could boost tax revenues by more than $100m a year.
The ICA tasked Deloitte Access Economics with examining the impact of replacing insurance taxes with a rise in land taxes such as council rates.
Although the changes were designed to simply replace the revenue shortfall with a commensurate raise in land tax, the modelling found a boost in economic activity could result in the overall tax intake increasing, says ICA CEO Rob Whelan.
“The modelling shows significant rises in both household consumption and government revenue when governments implement this long-overdue financial reform,” he says.
“Household spending rose in every state and territory once insurance levies were replaced by more efficient taxes, leading to an increased tax intake for governments.”
The biggest jump would be felt in NSW, which has both stamp duty and an emergency services levy on insurance.
There, the modelling predicts an increase in consumption of up to $3b over five years, followed by $1.08b in Victoria, $582m in Queensland, $298m in South Australia and $263m in Western Australia.
Overall, the increase in economic activity could increase tax revenue by $575m nationally over five years.
“The Baird Government could reap an extra $400 million dollars by implementing a reform that’s long been advocated by independent inquiries, as well as the participants at last month’s National Reform Summit,” Whelan says.
NIBA, a long-time advocate for the abolition of inequitable insurance taxes, has backed the ICA position and will be developing consumer information on the subject for brokers to use in their own marketing efforts to raise awareness of the issue.