November 27, 2003 by Canadian Underwriter
In its pre-budget submission to the federal government released this week, the Insurance Brokers Association of Canada (IBAC) is asking the federal government to conduct a study of the impact of the goods and services tax (GST) on brokers.
Currently, brokers are tax exempt in terms of collecting GST on insurance sales, but must pay the tax on all purchases. “Very limited in their ability to pass on their costs to consumers, brokers are left with little choice but to absorb the cost of the GST on their purchases themselves which results in an equivalent reduction in their bottom line,” states the IBAC submission. IBAC notes that Canada’s taxation system for the insurance industry has been shown to be particularly onerous as compared to other G7 countries in a recent study. It adds that other countries are looking at the impact of value-added taxes.
IBAC’s submission also addresses concerns over the employment insurance (EI) system, specifically its expansion to cover new benefits such as parental leave. IBAC says that the expanding role of EI is leading to labor shortage issues for many small businesses, including brokerages. “The growing use of th eEI program to further the social policy objectives of the federal government is IBAC’s greatest and most costly concern relating to the program. In particular, the recent increase in EI parental benefits has been quite taxing on the business operations and bottom line of insurance brokerages.” As well, IBAC advocates a 50/50 split between employers and employees in the payment of EI premiums.
Finally, IBAC wants to see brokers who take education courses in their chosen line of work able to claim these for education tax credits. While unemployed persons or non-brokers can take the same courses and receive credit, licensed brokers cannot claim payment towards continuing education courses. “Encouraging all Canadians to meet the challenges of the knowledge-based economy, and making the right investment in our workforce, can only further foster Canada’s global competitiveness.”