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Stamp duty: old arguments, new hope

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“There is a compelling case for abolishing stamp duty on insurance.”

“All specific taxes on insurance products… should be abolished.”

“State and territory taxes and levies on general insurance should be phased out and replaced with less distortionary taxes.”

Many different comments – each from a different government review – carry the one consistent conclusion.

State stamp duties on insurance premiums are inefficient, increase the risk of underinsurance and should be abolished.

But while the ACT will complete a phase-out of stamp duty on general and life insurance by July next year, most states and territories are still applying taxes.

The Federal Government’s wide-ranging tax discussion paper has raised the issue again. But the arguments are so well rehearsed even some of the most ardent campaigners have not responded this time.

However, the Insurance Council of Australia (ICA) believes it is crucial to keep up the fight, and it hopes this review can succeed where so many others have failed.

Its submission argues, once again, for the removal of state stamp duties on insurance.

GM Policy Regulation John Anning told that while it may be a no-brainer, the point must still be made.

“A wide-based tax reform initiative provides the best prospect of removal,” he said.

The major hold-up, of course, is how the states would make up the lost revenue – a not-insignificant $3.7 billion in 2012/13.

ICA recommends removing exemptions or expanding the tax base for payroll, land or gambling taxes.

But Mr Anning accepts it’s easier said than done. “We have made suggestions, but these would not be easy for any state to do alone,” he said.

“Maybe, under this broad-based review, alternative sources of revenue will be suggested.

“The states would have to buy into it. We are hopeful that momentum is building and it will bring the economic arguments to the fore.”

LMI Group founder and MD Allan Manning is a long-time campaigner against stamp duties. He feels it’s too easy to do nothing, because “it’s a hidden tax, it’s off the radar”.

And he worries the mainstream media has missed highlighting the issue.

“People are so fixated on the cost of insurance in Queensland, but if the insurance taxes were removed that would make a significant difference. Every review says get rid of it, but there has been no will to do it.

“I simply can’t understand it. I’d like to think it will happen this time, but we’ve been here before. It just needs the political will to do it – a bit of backbone.”

He argues increasing GST may be the solution to lost revenue.

It may not be popular, but people would come around if it was properly explained and there was bipartisan support, Professor Manning says.

Mr Anning agrees adjusting the GST has potential, “but I wouldn’t like to comment on the political feasibility”.

The National Insurance Brokers Association has campaigned hard on the issue over the years, but this time it hasn’t made a submission.

“The main issues have been covered by ICA – we’re as one on this issue,” CEO Dallas Booth told “Many reviews have said [insurance taxes] should be removed, but the issue is what you replace them with.

“We’re positive about the ACT Government taking steps – it is leading the way.

“It just requires a bit of leadership at the political level.”

ICA was not the only organisation to raise the issue in submissions to the latest review.

Westpac also backs abolition, as recommended by the Henry review in 2010.

“Insurance taxes affect the overall affordability of insurance and can distort the purchasing behaviour of consumers such that they either choose not to purchase insurance, reduce their level of cover or increase their excess to reduce their total insurance premium,” the bank says in its submission.

The Financial Rights Legal Centre agrees, and submits the Government should empower a regulator to “ensure insurers genuinely pass on savings to consumers”.

The Chamber of Commerce and Industry Queensland stresses the affordability issue, saying high insurance premiums, exacerbated by stamp duty, are a hindrance to businesses.

The next step for the Federal Government will be development of a green paper later this year.

“When we see [the green paper] we will work with members to see if there are options that we want to explore,” Mr Anning said.

Perhaps a way forward will be proposed that all states can buy into. That would mean these inefficient, damaging taxes can finally be consigned to the dustbin of history.