April 19, 2016 by Canadian Underwriter
When a 15% retail sales tax on property and casualty insurance policies takes effect this July in Newfoundland and Labrador, that province will have the highest taxes on insurance premiums in Canada, an Insurance Bureau of Canada official suggests.
The provincial government budget for the 2016-17 fiscal year was tabled April 14 by Cathy Bennett, Newfoundland and Labrador’s Liberal Minister of Finance and President of the Treasury Board.
“The Retail Sales Tax on insurance premiums is being reintroduced on July 1, 2016,” the government states in its budget document. “A tax of 15 per cent will be applied to insurance premiums for property and casualty insurance policies.”
Total projected annual revenue from that tax is $111 million.
“The retail sales tax is something that the previous government had done away with after about a decade of lobbying from IBC as well as the entire p&c insurance industry,” said Amanda Dean, IBC’s vice president, Atlantic Canada, in an interview with Canadian Underwriter.
Quebec currently has the highest premium taxes in Canada, Dean added.
But as of July 1 – in addition to bringing back the retail sales tax on insurance premiums – the Newfoundland and Labrador government will also increase, by one percentage point, the Insurance Companies Tax, currently at 4%.
“As a result of those tax measures, consumers from Newfoundland and Labrador will pay the highest taxes on insurance premiums in the country,” Dean (pictured left) said.
“Implementation is going to be key, especially from the industry’s perspective,” Dean added. “We have calls into the Department of Finance to engage in discussions with industry.”
The province estimates the deficit for 2015-16 will be $2.2 billion. It is increasing a variety of taxes to bring the deficit down to $1.83 billion in 2016-17.
In addition to increasing the tax on insurance premiums, the province’s ruling Liberals also plan to raise the general corporate income tax from 14% to 15% retroactive to Jan. 1. Gas and diesel taxes will also be raised.
Total public sector debt in the province is estimated at $15.67 billion, as of March 31, 2016, up from $6.8 billion four years ago. Total provincial direct debt is estimated at $10.345 billion as of March 31.
Revenues for 2015-16 were originally budged at $6.976 billion but have since been revised to $5.6 billion.