GEELONG CHAMBER OF COMMERCE

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                     The Geelong Chamber of Commerce__
                     Advancing Business and Industry in the Geelong Region

             Victorian Business Centre 69-71 Moorabool Street GEELONG VIC 3220

Tel: 03 52222234            E-mail: admin@geelongchamber.com.au                   Fax: 03 52222235



                                        SUBMISSION
                                             TO THE
        INQUIRY INTO STATE GOVERNMENT TAXATION AND DEBT
                       FIRE SERVICES LEVIES
                                                                                    2 October 2009


1. INTRODUCTION

    On behalf of its Members, The Geelong Chamber of Commerce is pleased to have this
    opportunity to make a brief submission to the Victorian Parliamentary Committee on Economic
    Development and Infrastructure as part of its Inquiry into State Government Taxation and
    Debt.

    The Chamber notes that the Inquiry will consider and report on the impact and effectiveness of
    increased State Government taxes and charges including, inter alia, levies on businesses, and
    their national….competitiveness under the State Government’s current taxation arrangements.

    The Chamber’s submission relates entirely to the imposition of fire services levies by the
    Victorian government on privately-insured properties in Victoria.

    The Chamber believes that this imposition is totally unfair and is a most unreasonable method
    of funding the major part of fire fighting services’ costs in Victoria.

    The Chamber submits that the big differences in the levies for metropolitan and regional areas
    is also a distinct disincentive against the setting up of new businesses in regional and rural
    areas and also a disincentive for businesses in the latter areas from taking out appropriate
    insurance cover for their properties or, worse still, for not insuring their properties at all!

    The Chamber accepts that funding for fire fighting services needs to be shared across all
    sections of the community.

    The Chamber is only objecting to the current method of raising the majority of those funds
    through fire services levies as imposed in Victoria.

    The Chamber submits that the Victorian government introduces a more equitable system of
    funding its fire fighting services and strongly recommends that this be a scheme similar to that
    of the Queensland government where the funds are derived from levies on rateable property
    which are collected by municipal councils, on behalf of the government.

2. THE CHAMBER
    The Geelong Chamber of Commerce has, as its primary roles, the fostering and advancement
    of commercial and industrial activity and being the effective and independent voice of business
    for the Geelong region.
Inquiry into State Government Taxation and Debt – Geelong Chamber of Commerce



    The Chamber is a totally independent non-profit business organisation and has operated
    continuously since its establishment in 1853 and represents all business and industry sectors
    in Geelong.

    It is non-political and is funded solely by members' subscriptions and is answerable only to its
    members - currently 700 - who are drawn from a wide diversity of large, medium and small
    business enterprises and organisations operating in Geelong, and include, for example, Alcoa
    Australia, Shell Geelong Refinery, Deakin University, Barwon Health, City of Greater Geelong,
    Geelong Football Club, etc., to individuals.

    The Chamber’s Vision is:
       The Geelong Region will be recognised nationally and internationally as one of Australia’s
       strongest and most prosperous centres of commerce and industry and the Chamber as its
       leading organisation representing and supporting business.

    The Chamber's Mission is:
       The Geelong Chamber of Commerce will advance business and industry in the Geelong
       Region through creative and innovative leadership, advocacy, co-ordination and promotion
       of business interests.

    The Geelong Chamber, in representing the community’s interests as well as business and
    industry members, sees itself as an important stakeholder providing regional leadership. This
    has been the recognised and accepted role of the Chamber over the past 156 years.

    Because the Geelong Chamber of Commerce commenced its operations in 1853, which
    makes it the second-oldest Chamber of Commerce in Australia to the Launceston Chamber, its
    membership make-up is much different to the more recent Chambers of Commerce.

    The Geelong Chamber of Commerce truly represents all business and industry sectors in the
    Geelong region and it speaks on their behalf.
    The Chamber has been long recognised as the Geelong region’s peak business organisation
    which responds to local business needs particularly those of small businesses.

3. FIRE SERVICES COSTS & LEVIES

   3.1 Background
       Fire Services Levies on privately insured properties were introduced by a number of
       Australian state governments as a means of raising funds to augment their fire fighting
       services’ budgets.

       However, only Victoria, New South Wales and Tasmania still use this system to raise
       revenue for these services, with the latter two states levies being much lower than those of
       Victoria. The Chamber understands that the other states have moved to a more equitable
       way of raising funds based on rateable property values.

       While Victoria’s fire services levies on privately insured properties in Victoria, based on the
       approved budgets for the Country Fire Authority (CFA) and the Metropolitan Fire Brigades
       (MFB) in 2009/10 will provide 66.48 per cent of those approved budgets combined, both
       New South Wales and Tasmania have significantly smaller levies at 36 per cent and 28 per
       cent, respectively!




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Inquiry into State Government Taxation and Debt – Geelong Chamber of Commerce



       The Chamber understands that the amount of the levy applied to regional and rural
       businesses is currently 63 per cent. When GST and stamp duty are added this becomes a
       massive surcharge over base insurance premium levels.

       If this is not bad enough already, the Chamber understands that the current
       recommendation from the Victorian government to the Insurance Council of Australia is that
       the levy for regional businesses be increased to 81%.

       The Chamber believes that this is excessive in the extreme!

   3.2 Actual Private Insurers’ Contributions
       The Victorian Fire Services levies in 2009/10 will collect a total of $509.27 million from
       private property insurers to go towards the CFA and MSB total combined operating costs of
       $766.04 million for this financial year,

       In addition, the Victorian government levies an additional $34.36 million on private
       properties situated in the metropolitan council areas which is put towards the cost of
       operating the MFB.

       Under this system, privately insured businesses and house owners throughout Victoria will
       pay a total of $543.63 million towards the combined operating costs of Victoria’s fire fighting
       services, which equates to 71 per cent.

       In addition to the fire services levies, stamp duty and GST on the whole amount are
       collected from these privately insured property owners which also go to the Victorian
       government as general revenue!

       In stark contrast, the contribution by the Victorian government towards fire fighting services
       in the state is considerably less!

   3.3 Victorian Government’s Contribution
       According to the approved budgets for the CFA and MSB for 2009/10, the Victorian
       government’s total contribution to these fire fighting services is only $222.41 million, or 29
       per cent!

       The Chamber is also aware that the Victorian government contributes an additional $122.36
       million towards the funding of the Department of Sustainability & Environment’s operations
       for all “land and fire management” under that Department’s control, including state forests
       and crown land, which includes an estimated amount for actual fire fighting costs in these
       areas.

       But these two combined amounts for the Victorian government fall well short of the $546.63
       million which will be levied on private insured properties this financial year and, in no way,
       can this extremely low level of government expenditure, under the circumstances, be seen
       as anywhere near fair or appropriate!

       Further, uninsured parties in Victoria pay nothing towards these fire fighting services apart
       from a small percentage of other taxes paid to the Victorian government as general
       revenue, but they still get the use of its fire services if their properties catch fire.

       Those uninsured properties in the metropolitan councils do have to make a very small
       proportionate contribution based on rateable property values relating to the $34.36 million
       collected by the councils for the Metropolitan Fire Brigades but this is relatively minor.




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Inquiry into State Government Taxation and Debt – Geelong Chamber of Commerce



   3.4 Fire Services Levies are Grossly Unfair
       The Chamber believes that this contribution level of costs forced onto the owners of private
       properties that are insured by the registered fire insurance companies is, in the Chamber’s
       opinion, excessive, totally unreasonable and grossly unfair!

       This situation gets worse for properties situated outside the metropolitan area viz. in
       regional and rural areas! The fire services levies applied to the latter insured properties are
       considerably more than for their metropolitan counterparts.

       Even when the additional $34.36 million being levied on these metropolitan properties as a
       contribution to the MFB is taken into account, it is nothing like the difference in the levies
       between metropolitan properties and regional and rural properties.

       The Chamber understands that the actual fire services levies are set by the Insurance
       Council of Australia after it is informed of the total amounts to be raised through levies
       required by the three individual states.

       The Chamber is not aware of the formula or the arrangements that the Council bases its
       calculations on but the difference in levies between a large metropolitan business property
       and a property of the same type and value in regional and rural Victoria can vary by many
       hundreds of thousands of dollars each year!

       While the Chamber reluctantly accepts that the differences between metropolitan and
       regional and rural levies is likely to be outside the scope of this Inquiry, it, nevertheless,
       believes that valid comment on the unfairness of this arrangement could be made by it.

       The Chamber is extremely concerned that this large variation in fire insurance premiums
       between metropolitan and regional and rural properties, plus the additional stamp duty and
       GST on them as a consequence, can effectively discourage businesses from setting up in
       regional and rural areas which is definitely against the aims of the Victorian government’s
       Provincial Victoria program.

       The big levy increase is also seen as a distinct disincentive against regional and rural
       businesses from providing appropriate insurance cover for their properties or, worse still, for
       not insuring their properties at all!

   3.4 Levies Abolished in Other States
       All Australian states, apart from New South Wales, Tasmania and Victoria, have abolished
       fire services levies because of their gross unfairness to property owners who act prudently
       by insuring their properties!

       According to estimates by the National Insurance Brokers Association (NIBA), some one
       third of properties and homes are presently uninsured and the NIBA believes that one
       reason for this is the high rate of fire services levies imposed by the three governments.

   3.5 A Fairer Funding System
       A fairer and more equitable funding of fire fighting services is that of the Queensland
       government which collects around 75 per cent of its funding for Queensland’s fire fighting
       services throughout the state through a levy scheme which is collected by municipal
       councils, on behalf of the government, and is derived from all rateable properties situated in
       urban districts as defined under its levy scheme.




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Inquiry into State Government Taxation and Debt – Geelong Chamber of Commerce



       This method ensures that all rateable properties make a substantial contribution to the fire
       fighting costs rather than relying mainly on those parties that act prudently by taking out
       insurance of their properties.

       This method of raising fire fighting funds avoids penalising only those parties that act
       prudently by insuring their buildings and property.

       The Chamber strongly submits that this is a fair scheme of raising funds for fire fighting
       services and that Victoria should move to adopt a similar scheme to fund its fire fighting
       operations carried out by the CFA and MFB.

6. FINAL COMMENTS
    As stated earlier, the Chamber appreciates the opportunity to make this submission to the
    Inquiry.

    The Chamber submits that the Victorian government should review its approach to the funding
    of fire fighting services and, particularly, the imposition of fire services levies on only those
    properties that are insured through registered insurance companies.

    The Chamber strongly recommends that this Inquiry accepts the arguments raised in its
    submission and that it recommends to the Victorian Parliament that the Victorian government
    adopts a system of funding fire fighting services similar to that used by the Queensland
    government and other states which derive their funds for fire fighting services based on
    rateable properties.

                                ______________________________



Submitted for and on behalf of The Geelong Chamber of Commerce.


The Chamber would like to be heard with respect to its submission.


The Chamber agrees that the contents of this submission can be made public.




Lawrie Miller
Executive Director

T: 03 52222234
F: 03 52222235
M: 0412 961 761
E-mail: lawriem@geelongchamber.com.au
Website: www.geelongchamber.com.au
Address: Victorian Business Centre, 69-71 Moorabool Street, Geelong Vic 3220

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