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General insurance industry supports tax reform and a GST



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February 26, 1998

GENERAL INSURANCE INDUSTRY SUPPORTS TAX REFORM) AIND A GST

The $53 billion general insurance industry' has supported a comprehensive tax reform package which includes a GST of between 10% and 12.5% with no zero rating and minimal exemptions.

In a policy paper released today, the Insurance Council of Australia (ICA) said it supported a GST at the lowest possible rate on the broadest base. ICA support is based on exemptions being confined to owner/occupied housing and narrowly defined financial services. General insurance should not be exempt.

The paper says the proceeds from a GST must be used to replace indirect taxes with only limited use of the revenue to reduce personal income tax.

ICA Deputy Chief Executive, Philip Maguire, said the general insurance industry supported a GST because of its potential to reduce taxation of business inputs and to generate system efficiencies.

“The industry has addressed the broader national interest as well as the interests of insurance consumers and insurance companies. There needs to be a great deal of goodwill and cooperation between government, business and welfare groups, and we believe the potential is there, and the insurance industry is prepared to be part of it.

“Tax reform is not simply a GST issue. It should aim to reduce taxation of business inputs, simplify the business tax system, reduce compliance costs and achieve greater equity tor all Australian taxpayers. Personal tax rates need to take into account the impact of a GST.

“These reforms will help Australia’s international competitiveness,” Mr Maguire said.

He said the priorities for abolition are wholesale sales tax (which costs business $13 billion a year), insurance taxes such as stamp duty and fire services levies ($1.7 billion), and then payroll tax ($7.1 billion) and financial institutions duty and debits tax ($1.9 billion).

Failure to eliminate state-based stamp duty and fire services levies on insurance policies (which go towards funding fire brigades) would mean a “double whammy” for all household and business policyholders who would pay one service tax on top of another.

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He said the industry recognised that reform will require protection of the financial positions of the States and Territories but believed suitable options did exist.

Industry specific recommendations in the policy paper include:

■ To provide certainty, taxation of personal injury compensation payments should be dealt with by specific legislation rather than Tax Office rulings

■ Changes to tax legislation, which currently makes structured settlements (as opposed to lump sum payments), in personal injury cases unattractive.

• Transfer of the Fire Service Levy, which in most States is levied on household and business insurance policies to help fund fire brigades, to the council rates system so it is dependent on a person owning property, and not whether they have insurance.

The Australian general insurance industry has assets of $53 billion with annual premium income totalling $19 billion, and 25.7 million policies in force.

Media inquiries: Rod Frail, Executive Manager, Corporate Affairs

W: 02 9299-7100

H: 02 9713-9599

M: 0413 98 98 97

Please note: Full copies of the report are available.