July 7, 2017 09:45
Photo : Freepik
The provincial government of Saskatchewan recently announced that it will introduce a sales tax of 6 % on premiums for individual life insurance, with effect from 1 August 2017.
The province provides an exemption from taxes to life insurance policies permanent issued prior to August 1, 2017, and to their future premiums. This exemption includes universal life insurance. The endorsements added to policies permanent issued prior to August 1, 2017 will not be taxed.
The tax will affect not only the insurance products for individual life, but also the products of living benefits such as disability insurance, critical illness insurance and long term care insurance, as well as group insurance, has revealed in an interview with the Journal of insurance Ron Sanderson, director, pension and taxation of the policyholders, of thecanadian Association of insurance companies of persons (CLHIA).
Mr. Sanderson adds that the tax will not be paid by annuities or reinsurance of people. «Taxing the reinsurance of a product an insurer would be like taxing twice on the same dollar,» he explained.
A tax that discourages savings
Among his other horses of battle, the CLHIA has been closely monitoring the level of taxation on insurance products of people, she would like to see it going down. Ron Sanderson recalls that the tax will add to a 3% tax in all provinces, and that is integrated to the premiums the insurers charge their policyholders. The tax of 6 % will be charged on the total premium. «We will find ourselves with a total fee that exceeds the 9 %. This is not good public policy. It discourages consumers from buying insurance for themselves and members of their family, and it discourages employers buy for their employees, » added Mr. Sanderson.
It is also, according to him, a tax that is unfair, which affects the insurance products and leaves exempt the banking products and mutual funds. «It is like saying : don’t buy insurance, but buy guaranteed investment certificates or mutual funds «, said Mr Sanderson.
This policy is tantamount to a tax on the savings. «The money savings the insured within an insurance policy, or risks that cover his insurance policy are the costs that people will pay for it later. What do we do when we have health problems? Taxing the bonuses is to change the problem «, said mr. Sanderson.
It is not surprised to see the Saskatchewan act, as well. «The province depends on the oil and gas industry which allows him to earn generous dividends. When the price of these materials is declining, the income of the government will decrease. He must find the money elsewhere, » says Ron Sanderson. To find out if the other provinces emboiteront the not, he replied that this is certainly a concern of the CLHIA.
He believes, however, that the example of quebec could cool the ardour of the other provincial governments. «In 1985, the government had introduced such a tax on the products of insurance of persons, individual and collective, as Pierre-Marc Johnson. Defeated shortly after by Robert Bourassa, the latter had not only cancelled individual insurance, but had refunded those who had paid. The government Bourassa has, however, maintained the tax on insurance premiums collective. Quebec has understood that the tax on the individual products was not good public policy, because it discourages savings and encourages people to purchase banking products rather than insurance «, said Mr Sanderson.