Insurance branch tax ‘will mainly affect customers’
Customers would be the most affected party if the government decides to set up a new tax for insurance companies, a top branch representative has warned.Günter Geyer, Vienna Insurance Group (VIG) chairman and head of the federal insurance companies association, said today (Weds): “Eighty per cent of the money managed by insurance companies belongs to the customers. If the government issues a tax affecting insurance companies, it needs to be aware such a tax will mainly affect the firms customers.”The government recently announced plans to introduce a “bank solidarity tax”. Social Democratic (SPÖ) Chancellor Werner Faymann said details still needed to be discussed by a special task group, adding he hoped it would bring an extra 500 million Euros every year.Peoples Party (ÖVP) Vice Chancellor and Finance Minister Josef Pröll called the decision a “question of fairness”. He said banks must also do their part in difficult times.Several Austrian banks received an overall six billion Euros in state aid last year in reaction to the global economic crisis and its effects on the institutes.The government has failed to reveal whether insurance companies would also be burdened with the new tax. But yesterday, ÖVP Financial Issues State Secretary Reinhold Lopatka announced the plan was to hold talks with the countrys insurance firms. Lopatka said the government was aiming for a “broad aspect” with the new tax.Geyer today warned Austrian insurance companies would be disadvantaged in international competition if the SPÖ-ÖVP coalition confronted them with the new tax.He argued companies in the insurance sector were already paying almost 2.5 billion in taxes per year.Allianz Österreich CEO Wolfram Littich said he agreed with Geyer.”Setting up such a tax would be a politically wrong decision. Insurance companies are not the perpetrators but those affected by the crisis. Austrian insurers did not apply for a cent in state aid,” he said, adding that the countrys insurance firms were “in a healthy state” as far as their financial situations were concerned.Littich also claimed a new tax affecting a certain industry branch might be unconstitutional.The government is meanwhile at odds over details of the planned bank tax.Faymann initially suggested banks should be ordered to pay 0.07 per cent of their total business year assets. Pröll argued the new tax “must not become a savings book tax” – meaning that customers were those who would suffer most.Bank bosses remained rather tight-lipped as the coalition revealed its plans.Raiffeisen Zentralbank CEO Walter Rothensteiner warned it was possible that customers could be the ones who felt the tax after all, while Erste Group head Andreas Treichl said he disagreed with Faymanns plan to focus on institutes business year assets in establishing the amount they must pay. Treichl said a new tax should focus on companies risky investment banking business.ÖVP Foreign Minister and head of the Federal Workers Association (ÖAAB) Michael Spindelegger said he agreed with such an approach.Austrian Trade Union Federation (ÖGB) chief Erich Foglar meanwhile said claims that only an EU-wide measure would make sense were just “excuses” not to do anything. He also called for a tax on financial transactions and the reintroduction of the inheritance tax.Globalisation critics Attac said it would not be enough to ask banks to pay 0.07 per cent of their total business year assets. The NGO said banks should be ordered to pay more.A new poll meanwhile revealed wide support for the governments bank tax plans.Forty-two per cent of the Austrian Times international readership taking part in the online newspapers most recent poll said: “banks are responsible for the crisis and should contribute their part”.Only 20 per cent said they opposed the plan to burden banks with a new tax.The government is currently negotiating how to reduce the budget deficit to 2.7 per cent of the gross domestic product (GDP) until 2013 to match the EUs Eurozone Maastricht criteria of three per cent.Austrias 2009 budget deficit reached 3.5 per cent after just 0.4 per cent in the previous year.