Henry report axes taxes.
By Roslyn Atkinson
NIBA Insurance & Risk Professional magazine
Bricher Comment: Victoria currently have the highest insurance taxes in Australia. FSL is currently 46% in the MFB area and 72% in the CFA area, for commercial insurance policies. For home insurance, it is 18% and 26%. Add to those taxes the cumulative additions of Federal GST and State Stamp Duty (tax on a tax on a tax) and the system is completely unfair.
Why should insurance client only pay for the fire services?
The above also means that a country commercial insurance client is paying more in taxes that for the actual insurance policy!
$100 premium + $72 FSL + $17.20 GST +$18.92 Stamp Duty = $208.12 payable
Please read the below article from the NIBA magazine.
As expected, the long-awaited Henry Tax Review has recommended the abolition of state taxes such as the fire services levy (FSL).
Recommendation 79 states: "All specific taxes on insurance products, including the fire services levy, should be abolished. Insurance products should be treated like most other services consumed within Australia and be subject to only one broad-based tax on consumption."
The recommendation is the latest in a long line of findings that the FSL and state stamp duty unfairly penalise those people prudent enough to take out insurance on their property.
Similar recommendations have previously come from the HIH Royal Commission and the NSW Independant Pricing & Regulatory Tribunal. It was also recommended by the Australian Financial Centre Forum in a report released on 15 January this year, titled: Australia as a financial centre: Building on our strengths (also known as the Johnson report).
This report stated: "The Forum recommends that all state taxes and levies on the insurance sector be removed."
FEDERAL GOVERNMENT PASSES BUCK
The Federal Government has now given its formal response to the Johnson report, stating that it supported the recommendation 'in principle' only.
"The Government agrees that these are inefficient taxes but notes that this is a state government responsibility," the Federal Government said. "The Government encourages the States to consider this recommendation."
Will that be enough to convince the Victorian Government? Will Premier John Brumby listen to the objective, expert opinions of Federal Treasury Secretary Ken Henry or the Johnson report?
Or will the Brumby Labor Government decide that the issue isn't enough of a vote-winner? After all, it is an easy way for the government to reap the $10million worth of fire services funding each year.
With the next Victorian state election in November this year, organisations such as the National Insurance Brokers Association (NIBA) are working hard to ensure the FSL is on the public agenda.
BUSHFIRE ROYAL COMMISSION SUPPORTS FSL ABOLITION
If the Victorian Government doesn't listen to the Henry Review or the insurance industry, perhaps it will listen to the Royal Commission into the Black Saturday bushfires.
Lawyers working on behalf of the Royal Commission have sifted through all the evidence about the FSL presented by insurers, industry bodies such as NIBA, experts and the Victorian Government.
The lawyers concluded that the levy is inequitable and should be replaced by a broad-based property levy.
"The Commission has heard sufficient evidence...to recommend the abandonment of the fire services levy," wrote the Counsel Assisting the commission. "The property-based models (such have been implemented by Western Australia or South Australia) are fairer and more transparent and should be preferred."
The recommendations by Counsel Assisting are almost certain to be adopted by the three commissioners led by the Hon. Bernard Teague when they make their final report in July.
NIBA will also be watching closely for the outcome of the Government's own review into the FSL, which commenced last October.
https://www.niba.com.au/html/38566.cfm
