June 01, 2018

Could taxing employer-paid health benefits dramatically cost Canadians?

Ottawa Parliament buildings

A report by the Parliamentary Budget Officer (PBO) indicates that introducing a tax on employer-paid health benefits could add $3.88 billion to the federal government net balance – but at what cost to Canadians?

According to the Canadian Life and Health Insurance Association (CLHIA) introducing this tax would significantly increase health-care costs for many Canadians.

“Taxing health benefits would raise health care costs for low and middle-income earners dramatically and put their highly valued benefits plans at risk,” CLHIA’s President and CEO, Stephen Frank, suggests.

“The PBO assumptions do not take into account the past experience in Canada that many employers would drop coverage and millions of Canadians would lose access to the benefits they depend on,” adds Frank.

Taxing employer-paid health benefits is a concept that has been discussed in Canada since 2016 but the option was ruled out by the Liberal government in February of last year.

 While the report states that the majority of the tax burden would be borne to high-income individuals since they are most likely to work in jobs that provide such benefits, this may be too broad of an assumption.

"Many employers see the value in offering health benefits to their employees across all industries so I don't know if we should just assume that the tax burden would fall on only high-income individuals," says Accompass Associate Vice President, Adrianna Stuart-Hagge.

Accompass will continue to monitor the situation and inform clients of any updates as discussions proceed.

If you have any questions please contact your Accompass Consultant.

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