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Industry responds to Saskatchewan's budget proposal to impose retail sales tax on individual life, disability and health insurance


Release Date: 03/30/2017
Staff Reference: Ronald Sanderson; Stephen Frank

March 30, 2017

The Honourable Kevin Doherty
Minister of Finance
Government of Saskatchewan
Room 312, Legislative Building
2405 Legislative Drive
Regina, SK S4S 0B3

Dear Minister,

I am writing on behalf of Canada’s life and health insurance companies to express our serious concern regarding measures contained in your March 22nd budget, and to request specific modifications to your proposals that our industry believes better align with Saskatchewan’s broader public policy objectives.

While we oppose the imposition of taxes on insurance premiums as discouraging employers and individuals from taking prudent steps to protect their employees’ and their families’ financial futures, we recognize that Saskatchewan has taken this step in response to the uncertainty of other sources of revenue. However, we note that, while a few other provinces do apply their retail sales tax to group insurance products, none impose retail sales tax on individual life, disability or health insurance premiums.

There are some very compelling public policy reasons that other provinces have not applied their retail sales tax to individual life, disability or health insurance products. Firstly, such products include a significant savings element. Taxing savings runs counter to the need for Saskatchewan residents to take control of their financial futures. In addition, it introduces a distortion in the marketplace in that savings through banks, credit unions, mutual funds and securities would not be subject to such tax. Secondly, applying retail sales tax to individual insurance premiums introduces a negative incentive for individuals to take prudent steps to provide financial protection for their families. Without private insurance, individuals often end up relying on the public system for support.

We would also note, that in the context of Saskatchewan’s large farming industry, that life insurance policies are an essential tool in financing the transfer of family farms and other businesses from one generation to another. The budget measure will make it even harder to preserve that cornerstone of Saskatchewan’s economy.

The budget proposes to tax the premium on insured disability benefits, but does not likewise tax the parallel benefits provided through uninsured arrangements This unintentionally encourages reliance on less secure disability arrangements that can evaporate when an employer becomes insolvent – as occurred for disabled employees of Eaton’s, Massey Ferguson, Nortel and many other companies. We would note that both the Federal government and the province of Ontario have recently passed legislation requiring that all disability programs only be offered on an insured basis for this very reason. Saskatchewan's budget proposals will provide perverse incentives in the other direction for plan sponsors and significantly reduce the financial security for disabled workers and their families.

Our analysis indicates that modifying the proposals to only apply retail sales tax on group life, disability and health insurance (both insured and uninsured arrangements), while refraining from taxing individual life, disability and health insurance, would still leave Saskatchewan with over 80% of the targeted revenue from this measure. Such a move would also eliminate undesirable biases in the current proposal and materially simplify tax administration and compliance for insurers. We respectfully recommend that the Government of Saskatchewan alter the proposed provincial sales tax changes accordingly.

We believe that changes in the provision are vital for the well-being of the people of Saskatchewan and taxing individual policies would not be harmonious with legislation already enacted elsewhere in Canada, which have all intentionally excluded such policies. We will be reaching out to your office to schedule a meeting with you on the above matters at your earliest opportunity.

Yours sincerely,

Original signed by

Frank Swedlove


Attachment: Life and Health Insurers: Working for the people of Saskatchewan

Copy: Clare Isman, Deputy Minister of Finance