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The C. D. Howe institute has spoken out against the tax on insurance premiums


Alain Thériault

3 October 2018 13:30

Photo : Freepik

The C. D. Howe institute is urging the provinces to eliminate taxes that are payable by insurers on insurance products, or at least turn in a tax credit to businesses. The Institute calls for the elimination of taxes on insurance premiums, that are payable by individuals, often without their knowledge.

In a report entitled ‘ Piling On – How Provincial Taxation of Insurance Premiums Costs to Consumers (LINK TO PDF), the authors, Alex Laurin and Farah Omran, consider that most consumers do not know that their province receives a fee built in to their life insurance premiums, health and damage on their insurance products, which can range from 2 % to 5 %.

This is according to a report of a double tax, since this tax is in addition to the retail sales tax, for a tax total of $ 7.3 billion (G$). “This figure does not include a$ 4.4 billion additional to other taxes, such as the tax on the income of the companies, that pay also insurers,” write the authors.

The brakes on insurance sales

They insist that this tax system made the insurance a financial services the most heavily taxed in Canada. Their report argues that the multiple tax paid by insurers or recycled back to consumers by insurers, increase the price of the insurance, and reduce demand, they add.

According to the model developed by the C. D. Howe Institute, an increase in the provincial tax on the premium of 1% reduced by 10% the number of insurance contracts sold (excluding the Territories). If fewer people buy insurance coverage for natural disasters, the death of a loved one or against the financial burden of the illness or disability, will this affect the long-term, the government budget, says the document.

The CLHIA and the TRAY at the front for years

The canadian Association of insurance companies of people has since many years as a horse of battle, the reduction of taxes on insurance products, which it considers unfair.

In February 2017, the industry association has set back the federal government, which wanted to impose a tax on group insurance products. In the same year, The CLHIA had however failed in its efforts to curb the Saskatchewan, which requires since 1 August 2017 a tax of 6 % on premiums for individual life insurance.

In 2015, The insurance Bureau of Canada (IBC) has asked the Quebec government to delay the implementation of the increase of the tax on automobile insurance premiums. However, the government has maintained. The 5% tax, which are subject auto insurance premiums is then increased to 9 %.

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