Campaign aims to fight Ottawa’s proposed tax on health benefits

The second federal budget of the Justin Trudeau administration is just around the corner, and speculation is rife that it could have major implications for Canadian workers. With a projected a deficit of $26.9 billion for 2017-18, Ottawa has floated a proposed tax on employee health benefits. The plan has been met with a lot of resistance, with the ‘Don’t Tax My Health Benefits!’ campaign urging workers to send a letter to their local MP imploring the government to reconsider the plan.

The campaign is backed by various industry bodies, including the CLHIA, the Canadian Dental Association and the Canadian Association of Optometrists.

In Canada, provincial health plans often don’t cover such services as vision care, mental health services, dental care, nutrition counselling and most significantly, prescription drugs.

Drugs costs in this country are second only to the US worldwide, and this has meant more and more firms are opting out of providing benefits for employees.

This in turn means more people using government plans, putting further pressure on the system.

Critics of the proposed levy point out that increased stress on public healthcare would therefore cancel out any gains made through taxation.

Zoltan Barzso is the president of Accurate Design Benefits & Insurance Agencies, and while he is well aware of the proposed tax, he says exact details have not been forthcoming from Ottawa.

“The government has floated this idea, but there has been no real consultation process,” he says. “It’s possible that it could even appear in the next budget. What is being proposed is that the premiums employers pay for health benefits would be taxable income for the employee.”

This is already the case with life insurance plans, but putting health and dental benefits in the same bracket would have dire consequences for many working Canadians, believes Barzso. Additional costs to employers is also something to consider, especially when the government is keen to promote small and medium-sized enterprise.

“The people that will suffer the most from this are those at the lower end of the scale that happen to have some benefits,” he says. “Employers will have to make adjustments – if you tax the premium on health and dental, because someone’s income goes up you end up with compound tax. All the government entitlements like EI and CPP, employers will have to pay more for those as they are based on income.”

In Barzso’s view, the government’s decision to target health and dental benefits as a source of funding is galling, especially when you consider the background of the man who will deliver Budget 2017.

“Bill Morneau, our finance minister, is in a better position than most to understand the carnage this decision will have,” he says. “His father’s company, (Morneau Shepell) that he chaired before becoming a politician, is one of the largest benefits consulting firms in Canada. I don’t know what the politics on all this are, maybe he has to stay out of it.”

On the Don’t Tax My Health Benefits! website, the campaign’s organizers point to a clear precedent when it comes to the proposed tax. Quebec introduced a similar policy in 1993, which led to approximately 20% of employers dropping health and dental benefits for employees.

‍Should the federal government decide to follow through with its current plan, then it is conceivable that an even higher percentage will stop covering its employees. It’s a phenomenon that already has some legs as it is, as Barzso explains.

“Employers are offering less benefits because the cost of drugs has risen so dramatically in the last couple of years,” he says. “There are drugs now like Harvoni, which is for hepatitis C and costs $80,000 a throw. Employers are already starting to reduce the coverage they are exposed to, instead sending people off to join government plans like Trillium.”


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