Recent increases in stamp duties on insurance imposed by the Victorian and Northern Territory Governments represent proof of why the Commonwealth needs to renegotiate the Good and Services Tax (GST) agreement with the state abolish inefficient state taxes and broaden the GST.
That is the assessment of the Financial Services Council (FSC) in a submission to the Tax White Paper process and comes at the same time as the insurance industry seeks to implement the changes flowing from the Trowbridge Report.
FSC policy director, Andrew Bragg, said Australia’s heavy reliance on company and personal taxation had to come to an end and that the GST had to be part of the tax mix switch.
“Including compensation for low income earners, a 15 per cent GST with a broader base would deliver $42 billion in additional revenue in 2015-16,” he said.
“The states are increasingly relying on inefficient, growth-destroying taxes to meet their expenditure needs. This has created a grossly inefficient and unwieldy tax base,” Bragg said.
He then pointed to the fact that Victoria and the Northern Territory had increased stamp duties on insurance in the past year, something which he said discouraging people from taking out insurance which added further pressure to Commonwealth budgets.
The FSC submission also revealed that the FSC had been meeting with advisers for the State Treasurers to explain the case for abolishing insurance stamp duties and to ascertain the degree of [the sates] support for change.
The submission said that the FSC was advocating that the concessional stamp duty treatment afforded to premiums for life insurance death benefits should also be afforded to premiums for Total and Permanent Disablement insurance, Trauma insurance and Disability Income insurance, issued by life insurance companies, for exactly the same reasons.
“These kinds of insurance benefits can serve as a substitute for government social security programs, provide a layer of protection against financial pressures, can prevent the liquidation of savings and assets during hard times and reduce the financial stress which often leads to significant health issues,” the submission said.
