Feds propose to slap GST tax on currently exempt insurance-related services

The federal government is proposing to widen the scope of financial services taxable under the GST, lifting current GST exemptions for a host of activities commonly undertaken in the development of insurance products.
The proposals call into question whether broker commissions are now taxable under the GST.
Parliament has not yet enacted the proposed amendments, although, once enacted, they would apply retroactively to Dec. 14, 2009.
Passed by the House of Commons’ Ways and Means Committee in mid-December 2009, the new GST provisions are intended to apply to “facilitatory services.”
Facilitatory services are defined in a February 2010 GST/HST Notice, circulated by the Canada Revenue Agency, as services that are “preparatory to an actual or intended financial service.” 
These services include “market research, product design, document preparation or processing, customer assistance, advertising, promotional or similar activities” and the “collection, collation or provision of information.”
The proposals would lift the current GST exemption for the above financial services.
In an article for PricewaterhouseCoopers’ March 2010 edition of In Print, author Mike Firth said it’s difficult to imagine what part of this definition would not apply to the activities of an insurance broker/company.
“If, at a cocktail party, one asked a licensed broker of insurance and/or investments products what it is they do, then the following is the likely answer,” Firth writes.
“‘Well, I research my market, to target my advertising and promotional activities. Once I connect with a prospect, I understand my customers’ needs to see if off-the-shelf products are suitable, or if I need to do any product design.
“Then I assist in the document preparation and processing.
“Of course the real key to success in the financial intermediary business is the highest standard of client experience, or what in the old days we used to call ‘customer assistance.’
“Bingo. Not just one, but all of the offending elements — so it would appear this broker’s commission is taxable effective Dec. 14, 2009.”