Trudeau says his government is not planning to tax health benefits

By Susan Yellin | February 02 2017 01:30PM

In an apparent reversal and amid rising opposition, Prime Minister Justin Trudeau said taxing employer-provided health benefits for Canadians is not in his budget agenda.

There had been much speculation that Ottawa was considering making employer-provided health and dental plans a taxable benefit, adding more than $1,000 to the income of taxpayers who can currently take advantage of the benefit – as well as bringing in close to $3 billion in additional tax revenues.

Questioned Wednesday

Trudeau was questioned about the issue again Wednesday in the House of Commons by interim Conservative Leader Rona Ambrose. “Millions of Canadian workers will be forced to pay the Liberals' new tax on health and dental benefits…. Why would the prime minister even consider doing this?” Ambrose asked.

After weeks of speculation, Trudeau then said his government would not be taking that step. “We are committed to protecting the middle class from increased taxes and that is why we will not be raising the taxes the member opposite proposes we will do,” he said.

Coalition fought change

The life and health insurance industry had joined forces recently to fight the potential change. Included in the coalition were the Independent Financial Brokers of Canada (IFB) and the Canadian Life and Health Insurance Association (CLHIA). The coalition encouraged Canadians to write to their MPs and the minister of finance to maintain the tax-free status of these benefits.

In an e-mail to The Insurance and Investment Journal, Stephen Frank, senior vice president, policy with the CLHIA, said he was pleased with Trudeau’s comment.

Industry reaction

“The life and health insurance industry is very pleased that the federal government has recognized the hardship that taxing health and dental benefit plans would have imposed on Canadians, particularly millions of middle and lower-income families. We fully support the decision to maintain the current tax treatment of employer health benefits that over 22 million Canadians rely on for their healthcare needs.”

Neil Paton, president and CEO of The Edge Benefits, whose company provides self-employed and small business owners with insurance solutions, agreed.

“A reversal in their position”

“On behalf of the significant number of middle-income Canadians who would have either lost their health and dental benefits, or had to pay more for them as a result of the proposed tax changes by the Liberal government, I am pleased with what appears to now be a reversal in their position.”

Paton noted though that what had been proposed was the removal of a tax deduction for health and benefits which in turn would have raised government revenue and reduced the availability of health and dental benefits for Canadians. “It was never proposed as a plan which would be ‘raising the taxes,’” he said.