The role of government is to safeguard the ongoing growth of the economy – FACT
Two of the primary roles of government is to encourage and protect business, and safeguard the ongoing growth of the economy.
The ever-increasing burden of taxation on insurance acts against both these roles. It is simply bad policy and it needs immediate change with the removal of double taxation and the reallocation of Fire Service Levy to rates and not insurance.
“Government has no other end but the preservation of property” John Locke (1681)
“The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Ronald Reagan (1984)
This site is an attack on New Zealand Fire Brigades – Furphy
The various Fire Brigades around New Zealand provide a vital service to the New Zealand community. They are made up of dedicated men and women who literally risk their lives protecting the people and assets that make up New Zealand.
These brigades require adequate funding to carry out this important work, however, what is being questioned or challenged by this site is the fact that the major source of funding for the Fire Brigades is a Fire Service Levy imposed upon the insurance industry. This tax is inequitable in that those prudent individuals who insure and particularly those who insure fully pay for the service and those who do not insure contribute nothing and those who under insure pay only a proportion of their fair share.
Fire Service Levy is not a Tax – Furphy
The Macquarie definition of a levy is:
1. raising or collecting, as of money or troops, by authority or force. 2. that which is raised as a tax assessment or a body of troops – verb 3. to make a levy of; collect (taxes, contributions etc) 4. to impose (a tax) to levy a duty on imported wines. 5. to raise or enlist (troops etc) for service. 6. to start or make (war etc) – verb (i) 7. to make a levy 8. Law to seize or attach property by judicial order. (The Macquarie Dictionary revised 3rd Edition, edited by Delbridge A., Bernard J. R. L., Blair D., Peters P. and Yallop., 2001 The Macquarie Library Pty Ltd, Sydney, page 1096.)
There is absolutely no doubt that a Fire Service Levy is an indirect tax on insurance. What compounds this is that GST is paid on the Fire Service Levy creating a huge win fall to the Government with taxes on taxes.
The imposition of high taxes on insurance does not affect the take up of insurance – Furphy
Anyone who has done Economics 101 understands the effect of price on demand. As price increases demand falls. Government must realise that when the cost of insurance is increased by taxes then the amount of insurance the community purchases falls significantly. They use this methodology of increasing taxes to reduce number of people smoking tobacco products.
A report by Treasury released in May 2016 concluded that up to 85 per cent of homes in New Zealand could be underinsured by an average 28 per cent, or about $184 billion. This report did not explore how many had no insurance.
No similar report has been completed in respect to business, however an Australian report estimated that at 30 June 2000 70% of all registered small businesses employing up to 20 persons had no insurance at all and those small businesses that were insured 43% were under insured for property.
We all should appreciate that the effect of under insurance can be devastating. Studies suggests that 70% of uninsured or under insured business that suffer a major loss by events such as fire fail within the 1st year following the loss. The impact on the community of a business failure extends beyond the owner and the immediate employees to suppliers, creditors and others associated with the business. In small towns, in particular the forced closure of a business can have even more effects adversely impacting the whole local economy.
Fire Brigades assist Insurers and it is only fair that they should pay – Furphy
The underwriting of insurance is based on risk: the higher the risk the higher the premium rate. The fact that a property is protected by a Fire Brigade reduces the risk in the eyes of the underwriter and a lower premium is charged. By definition, if the rate charged to an individual already takes into account, the benefit provided by the Brigade, therefore there is no benefit to the Insurer as the premium already reflects the benefit, with this benefit by way of a cheaper premium having been passed on to the Insured.
The funding of Fire Service Levy by Insurers is a hang up from the past – Fact
The first Fire Brigades were introduced in the United Kingdom following the Great Fire of London in 1666. Insurers created and funded their own Fire Brigades to reduce the risk of such a catastrophic event.
As an aside, it is yet another furphy that these Brigades only attended fires involving one of their insured policyholders. These private fire brigades protected the community as a whole.
Insurers in New Zealand were also instrumental in setting up fire brigades here with the first New Zealand volunteer fire brigade was formed in Auckland in 1854. After starting with only buckets the brigade soon upgraded to manual pumps after they were provided by the Auckland City Council and insurance companies.
Based on the success of the Auckland Brigade, volunteer brigades began to spring up all around the country. 1860 saw the Christchurch Volunteer Fire Brigade formed. They were provided with manual fire pumps donated by Liverpool, London & Globe Insurance Co. The following year Dunedin’s Volunteer Fire Brigade was formed with, what is believed to be, New Zealand’s first paid firefighter – Superintendent Robertson. By 1865 Wellington had followed with its own volunteer fire brigade and Auckland’s brigade was reformed on a permanent basis after the original group had broken up.
Fire Service Levy discriminates against the poorer members of the community – Fact
It is self-evident, that higher prices caused by large tax rates depresses demand of a product. It is the poorer members of the community who are the most effected. The same poor members of the community have the lowest financial capacity to recover following a major disaster, which is not insured.
FSL tax is inefficient – Fact
The Fire Service Levy has a tax base limited to those persons and organisations which take out property insurance. This base is further reduced by under insurance. The limitations are completely unnecessary and result from poor scheme design and certainly not from a specific demand for equity, economic efficiency and transparency.
Fire Service Levy also applies to contract works insurance, the tax also increases the cost of new homes, which again is an unfair burden on younger New Zealanders and those struggling to buy their first home and is contributing to the unaffordability of housing to many New Zealanders.
Fire Service Levy is a user based tax – Furphy
The Fire Brigade not only attend the fighting of fires at insured property. Around 16% of fires are grass or rubbish fires where there is no property involved and therefore no Fire Service Levy is recovered. The Fire Brigade also carry out emergency rescue services for road accidents. The Fire Service Levy is only charged to those motorists who buy insurance. They also attend medical emergencies through partnerships with ambulance services. The Fire Commissions own research showed that in 2014/15, the proportion of non-fire incidents that the New Zealand Fire Service attended was 38 percent of the total and that this proportion was growing. The whole system is simply unfair and requires a major review.
