Taxing our health and dental benefits

Important Message to our Members

December 6, 2016

We have been contacted by some of our members that are concerned about the possibility of the Federal government taxing our health and dental benefits as a possible source of additional revenue as they prepare for the 2017 Federal Budget.

Please visit the website http://donttaxmyhealthbenefits.ca for more information on this hot topic and to send your views on this issue to your local MP and the Minister of Finance.

The following article in the National Post also provides some information.

National Post article December 2, 2016 by John Ivison:

Federal Liberals eye tax on private health and dental plans, a move that would take in about $2.9B

The Liberal government is considering taxing private health and dental plans, in a measure that would raise about $2.9 billion, sources say.

As many as 13.5 million Canadians have lower tax bills because health and dental benefits are not treated as taxable outside Quebec. Dan Lauzon, a spokesman for Finance Minister Bill Morneau, said no decisions have been taken and that any moves would not be made in isolation. The employer-sponsored health care tax exemption is being scrutinized as part of a sweeping review of 150 tax credits worth about $100 billion a year in foregone federal revenue.

Lauzon said the review is not being seen as a revenue-generating exercise. The Department of Finance has asked seven external experts to look at the tax system to ensure that it is as fair, efficient and simple as possible.

It is understood the academics reviewed health and dental benefits, but it is not clear what they recommended. The argument for killing the health and dental benefit exemption is that it does not treat all remuneration equally. Most employee benefits are taxed – for example, life insurance paid by employers are reported on employees’ T4 slips and included as taxable income. Similarly, a car paid for by an employer is taxed. But health benefits are an exception. Proponents of eliminating the credit argue that those with lower incomes but without private health plans are subsidizing those with employer-sponsored coverage.

On the other hand, there is a strong economic case for encouraging employers to provide health coverage for employees. Quebec included health and dental plans as a taxable benefit in the early 2000s and found that employers scaled back the coverage offered.

The Liberals have been clear that they intend to take action on eliminating some tax credits, particularly those that benefit higher-income Canadians.

There is a strong economic case for encouraging employers to provide health coverage for employees.

Morneau told the Senate finance committee that changes are coming.

“We think we did make some simplifying efforts in budget 2016, but we know there’s more work to be done in this regard to look at things that no longer have the desired impact,” he said. “It’s an effort that we’re pursuing.”

The 2016 budget removed the children’s fitness tax credit and the children’s arts tax credit.

During the 2015 election campaign, the Liberals talked about reducing or eliminating the credits for individuals paid by stock options, but backed away, over concerns from Canada’s high-tech sector.

Any attempt to hit health and dental coverage would be controversial, particularly because of the many Canadians who receive it.

But the prospect of raising such as much as the $2.9 billion forecast in the current Report on Federal Tax Expenditures might prove too enticing for Morneau to ignore.



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