Plan to tax air insurance fails to fly


(TVLW) – State governments may be hurting their economies by attempting to levy stamp duty on aircraft insurance policies.

NSW is the latest state to seek to levy stamp duty on aircraft insurance for the take-offs and landings that foreign airlines make at local airports.

The levy applies even if the aircraft are insured overseas.

Australia is believed to be the only country in the world to impose the tax.

The move has prompted the airline industry to lobby the NSW Independent Pricing & Regulatory Tribunal against the stamp duty, describing it as a hidden tax on international tourism that fails the transparency test.

That view received support late last month from the nation’s peak tourism lobby group, TTF Australia.

Modelling commissioned by TTF and the Sustainable Tourism Co-operative has found that that the onerous taxes are a burden on state economies and lead to lower gross state product.

TTF aviation spokesman Mark Dimech said the moves by Australian states to levy the aircraft insurance stamp duty was effectively a tax on air travel.

He said it taxed both inbound and outbound travel, but had a bigger negative impact on inbound travel.

Individual states must therefore decide whether an increase in tax revenue was worth the cost in reduced economic activity that resulted from the imposition of stamp duty, Dr Dimech said.

A worrying possibility is that other countries will respond with stamp duty measures of their own, affecting Australian carriers operating in those countries.

Airlines say the tax is costing overseas carriers millions of dollars and is adding to the expense of operating to Australia.

In its submission to the NSW tribunal, the Board of Airline Representatives of Australia (BARA) argues that ships are exempt from the stamp duty, so aircraft should be exempt too.

The recent move to impose stamp duty on airlines’ global insurance policies is inequitable, it says.

The imposition of duty in the case of airlines discriminates against aviation relative to the maritime sector, it argues.

The submission says the stamp duty is inefficient because it increases the cost of trade and commerce in NSW enterprises, and the way it is assessed is inappropriate and fundamentally flawed.

The airlines are particularly displeased that the tariff was negotiated between state and territory revenue offices and the Insurance Council of Australia without consultation with the industry.

The current method of apportionment was probably designed to be administratively simple for insurers, who generally pass on the duty to policy holders, the submission says.