INSURANCE TAXATION

Taranaki Daily News, 6 August 1930, Page 7

INSURANCE TAXATION

EFFECT OF NEW IMPOST. WORLD TENDENCY IGNORED. ————— The taxation proposals of the Government will seriously affect the finances of life insurance companies, and the main objection is that the increased imposts amount to a tax on the thrift of policy holders. A statement reviewing the effect of the Budget proposals has been issued by the Australian Mutual Provident Society. “The tax,” says’the statement, “is an unfair penalty on a form of thrift that should be encouraged by the Government in every possible .way, as it is the means of saving the Government from payments of large sums of money to widows and orphans who would otherwise be thrown on the State for support. The average life policy is under £2OO, and the majority of policies are held by persons whose .incomes are too small to be taxable, yet by taxing life assurance companies the Government is indirectly taxing the small savings of those unfortunate individuals who are endeavouring to the best of their ability to provide for those dependent on them. “As a result of the activities of the life offices the Dominion already obtains considerable revenue each year from succession duties on the proceeds of life assurance policies. Married men with families who effect life policies are already taxed heavily enough in other ways. Any tax upon a life office necessarily diminishes, by that sum compounded at interest, the amount of insurance protection which the premiums will purchase. “The essential principle of life assurprotection and not profit, and a life office should, therefore, be at least on the absolute minimum basis of taxation, if not entirely exempted. The tendency throughout the world is to relieve life assurance societies from income tax, as they should be no more liable to it than the savings bank or friendly societies, being worked on the same basis for the sole benefit of the policy holders. “The Government should be satisfied with the increase under the other provisions, which will mean an addition of £3OOO to £4OOO to the Australian Mutual Provident Society for this year,' or £5OOO to £6OOO over the amount paid in 1929, although the surplus divided among the policy holders was less. The proposed alteration would almost double our taxation, and the society alone pays between £17,000 and £lB,OOO in income tax. It must not be overlooked that the rates of premium charged by the life offices are not uniform, and consequently which charge the lower rates would pay less taxation, although the others return the surplus of premium paid in additional bonuses each year. “It is now recognised that interest is the only fair basis for income tax, and the Government Life Department should be taxed on it the same as the other life assurance societies. The Federal Government, New South Wales Government and the Western Australian Government all charge on interest. The latter was changed a few years back from the percentage of premiums basis, which is now considered unfair. The industrial policy holders could not possibly pay on 25 per cent, of the premium receipts."