In a submission to the draft report of the NSW review of Federal Financial Relations, the Financial Services Council (FSC) has welcomed the report’s recommendations to abolish insurance duties.
The FSC said the draft report was consistent with the FSC’s criticisms of those taxes.
“We particularly welcome the review’s draft findings that these taxes can lead to underinsurance and non-insurance which is a ‘national crisis’ that has ‘serious human and social consequences’,” the submission said.
“The FSC supports the review’s draft conclusion that these insurance specific taxes should be urgently abolished.”
The FSC submission also supported proposals that major state tax reforms “should not be discouraged” by the GST distribution formula.
The FSC said the review should consider more targeted reforms to payroll tax, in the event the Government was unable to implement other reforms to reducing or removing exemption thresholds.
Because it wasn’t expected to have adequate public support for removing payroll tax, it suggested removing payroll tax from the payments by financial advice licensees to financial planning businesses and moving to a “harmonised collection mechanism” for payroll tax.
It also recommended changes to the review’s approach to modelling the economic impact of Federal and State taxes.
“The modelling quoted by the review finds that taxes on insurance are inefficient, with the rate of payroll tax slightly less inefficient, and both taxes are found to be more inefficient than the GST,” it said.
“However, we noted in our submission to the review that the analysis of life insurance taxes may understate the inefficiency of the taxes imposed on life companies.”