The national economy would be boosted by more than half a billion dollars annually – over five years – if state and territory governments replaced stamp duties on insurance policies, new research by Deloitte Access Economics shows.
The research, which was done for the Insurance Council of Australia, shows that the impact of replacing “inefficient” state stamp duties – such as motor vehicle tax and insurance taxes – with a rise in land taxes such as council rates. The land tax rate would depend on the value of the property, as it currently does.
Deloitte’s modelling shows rises in both household consumption and government revenue.
In New South Wales there would be more than $3 billion in extra consumption over five years, followed by Victoria ($1.08 billion), Queensland ($582 million) South Australia ($298 million) and Western Australia ($263 million).
That increase in economic activity would lead to an overall rise in tax revenue across all state and territory governments of $575 million annually after five years.
Several states are currently considering changes to stamp duties. The ACT has cut insurance taxes and it will be fully abolished from July 1, next year. South Australia has committed to phasing out stamp duties on non-residential property transfers over the next three years.
The research also looked at the economic impact of removing the Emergency Services Levy (ESL) in NSW, and replacing it with commensurate increases in municipal land rates. In this way, NSW, which imposes both stamp duty and an emergency services levy (ESL) on insurance, has most to gain from reform.
“The Baird Government could reap an extra $400 million dollars by implementing a reform that’s long been advocated by independent inquiries, as well as the participants at last month’s National Reform Summit,” ICA chief executive Rob Whelan said.
“The ACT Government could raise an additional 2.24 percent in tax revenue, while South Australia and Victoria would gain about half a per cent – significant yields in the context of a state or territory budget.”
Mr Whelan said earlier ICA-commissioned research found removing state-based premium taxes would lead to 242,000 more Australian households taking out contents insurance and 38,000 buying house insurance.
“Not only are taxes on insurance highly inefficient, they substantially increase the incidence of under-insurance and non-insurance in the community,” he said.
Source: The Sydney Morning Herald