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Support builds for ditching NZ fire levy

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Pressure has increased for Fire and Emergency New Zealand (FENZ) to be at least partly funded through taxation, as responses to a Government review largely support ending an insurance levy that allows “free-riding”.

A Government consultation paper released last year said funding mainly through taxation was outside the scope of the review, but a summary of submissions received shows many put forward the case anyway.

The Insurance Council of New Zealand (ICNZ) believes full taxpayer funding is the best option, but it would support a mixed model that includes direct levies paid on property and through motor vehicle licensing.

“We have never considered that funding FENZ through a levy on insurance is appropriate and we’re pleased with the overwhelming support from the submissions for future funding to be supported by general taxation,” ICNZ CEO Tim Grafton said.

“It’s now time this was implemented.”

Internal Affairs says more than half the written submissions commented on general taxation being ruled out of scope of the review, and it was also a “popular theme” at public meetings.

“These submitters all stated that in their view general taxation should be in-scope for the review,” the summary report says.

“Of those that commented on this there was a range a range of positions, from stating that Fire and Emergency should be wholly funded through general taxation, through to an increase to the Crown contribution.”

Arguments include the public good aspects, the simplicity of tax collection, scrutiny through the budget process and the universal approach.

The local government sector put forward 14 submissions, supporting general taxation as the preferred funding avenue, and highlighting difficulties with using their systems and data.

FENZ is currently almost entirely funded by a levy on property insurance under arrangements set to continue until July 1, 2024.

The Government recognised, in launching the review, that the model effectively disadvantages people who take out insurance compared with those who don’t, and most Australian states have moved to an alternative.

“A number of submitters from outside the insurance sector identified the free-riding problem as an issue, where those who do not insure their property do not pay levy,” the summary paper says. “This was the key issue submitters had with an insurance-based system.”

Nevertheless, other submitters say maintaining the status quo would be the simplest and least disruptive option.

Insurance sector submissions note a reducing connection between property insurance and FENZ’s activities, which have been extended to include responses to natural disasters and other emergencies.

Insured value is not necessarily relating to the risk supported by FENZ, and the levy is costly and complex for insurers and brokers to collect.

“We now have an opportunity for the first time in many years to get this right. Hopefully, all parties will support change to a fairer, more transparent, and less costly system,” Mr Grafton said.

Internal Affairs says phase two of the review will involve analysing, selecting and consulting on a preferred funding model.