NDP backs down on new tax

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Conservative Leader Hugh McFadyen receives a standing ovation on his last day in the Manitoba legislature during Thursday's session. (BORIS MINKEVICH / WINNIPEG FREE PRESS) Photo Store

The Selinger government took the rare step Thursday of backing down on imposing a new tax on individual illness-and-disability insurance because of pressure from two of Canada's biggest insurance companies.

The sudden change of heart -- the NDP first sold the tax hike as a way to beat down its deficit -- came after a relentless protest by major insurance companies, including Great-West Lifeco, Wawanesa Insurance and industry lobby group the Canadian Life and Health Insurance Association (CLHIA).

It also came on the last day of the spring legislative sitting, a sitting in which the New Democrats took a pounding from critics on cabinet ministers accepting free Winnipeg Jets tickets and using immigrants as pawns to oppose the Harper government's pending changes to the administration of immigration services in Manitoba.

"If you ever needed a session that shows the need for an alternative, this is the one," said Brian Pallister, a former MLA and MP and the lone candidate to replace Progressive Conservative Leader Hugh McFadyen, who saw his last day in the legislature on Thursday.

Insurance companies said the issue could have been avoided if the government had consulted with the industry on its intentions.

What also raised their ire is the budget papers first released April 17 made no mention of extending the seven per cent provincial sales tax to individual critical illness and disability products -- that only surfaced in the budget implementation act introduced June 6.

"We're very disappointed with the legislative process, particularly the lack of consultation on this matter," said Paul Mahon, president and CEO of Great-West Lifeco. "Over the last number of days, we've been reaching out to government and essentially the more senior levels of government really have been unwilling to engage, so it's been very challenging."

Mahon said if taxed, disability insurance for an independent business owner could cost and extra $500 a year, a price that would dissuade some from buying the coverage and in turn put more onus on the health-care system and other public services should that business owner be injured. It would also make Manitoba the only province to tax those insurance products.

However, a breakthrough happened Thursday morning when a compromise was reached.

Premier Greg Selinger told the house at the beginning of question period individual insurance for disability, critical illness or accidental death and dismemberment would be excluded from the PST. An amendment to that effect was passed unanimously in the house about two hours later.

Wawanesa Insurance CEO Mary Nemeth and controller Pat Horncastle said they welcomed the change, but also said it could have been avoided.

"Certainly, the industry was disappointed in the process,"

Horncastle said. Nemeth said the province not only failed to give the industry time to respond, but to also comply with the new tax regime on insurance products that will be subject to the PST; group insurance products will be taxed.

The original target date for the tax to be collected was July 1, but at the industry's urging it's been pushed back to July 15.

"These are not systems that we can just put in a couple of lines of code and voil, we're done," Nemeth said. "A little bit of extra time would have been nice."

Selinger said the province's reversal on the new tax measure came as result of negotiations between Finance Minister Stan Struthers' office and the insurance industry.

"Once a budget's rolled out, we frequently have discussions with people in the community that are impacted by various measures, and as a result of listening to them it's not uncommon to make changes," Selinger said.

The opposition Progressive Conservatives welcomed the change, but said the NDP would not have changed it without pressure from the insurance industry.

"The NDP only changes things when they get caught," Tory finance critic Heather Stefanson said.

CLHIA spokesman Ron Sanderson said part of the issue is the NDP's new tax on insurance products was "unhappily drafted."

"There seems to be a disconnect between the policy intent and how it has been drafted," he said.

The NDP has expanded the PST to include a number of other previously untaxed services, such as spa treatments, pedicures and manicures -- to take effect July 1 -- as it attempts to wrestle with its budget deficit, forecast to be $460 million this fiscal year.

bruce.owen@freepress.mb.ca

Feeling taxed? You'll

soon be feeling it more

STARTING July 15, the province will charge provincial sales tax on a number of insurance premiums that were previously exempt:

Property insurance

IT'S hard to know what the average Winnipegger will pay when PST is applied to home-insurance policies, because rate calculations are complex, based on a home's location, size and discounts for things such as alarm systems. As an example, though, a 1,000-square-foot home in St. James with a finished basement and no garage might cost $600 to $800 a year to insure. The owner of such a home might expect to pay an extra $40 or $55 a year in PST.

Group life insurance

MANY companies cover the cost of group life insurance programs. For a medium-sized company that pays $140,000 a year in group life insurance premiums, the extra charge would be just under $10,000 a year. Federal sales tax isn't charged on group life insurance premiums. Ontario already taxes certain types of insurance, including group insurance.

Trip cancellation and baggage insurance

THE cost for trip-cancellation insurance can vary significantly. If you're a senior taking a multi-week holiday, you might pay $700 for trip insurance just in case something goes wrong. The PST will add another $50 to that. If you are just taking a weekend jaunt to Vancouver, the extra PST might only come to a couple of dollars. But, as Daryl Silver, president of Continental Travel, points out, vacations are already one of the most heavily taxed purchases Canadians make.

Other PST changes

EFFECTIVE July 1, the seven per cent provincial sales tax will be levied on spa treatments, manicures, pedicures, tattooing and body piercing, which was announced in April's budget that passed on May 1. The province is forecasting a $95.5-million revenue boost from the new tax.

Notable bills passed

PREMIER Greg Selinger said the underlying theme of the session, which saw about 40 bills passed in its dying hours, is the economic fragility that still grips governments in Canada and the rest of the world.

"Governments are all working to find a way to grow their economies and bring their budgets under control," he said.

In that vein, he said one notable bill requires Manitoba to have the lowest utility costs in Canada so it's the most affordable in the country.

Other bills include:

Recognition in the Human Rights Act to protect transgender identity from discrimination;

Expanded Sunday shopping to allow stores to operate from 9 a.m to 6 p.m.;

Mandatory bicycle helmets for anyone under 18;

Booster seats for children up to age eight.

Allow municipalities to reduce speed limits in school zones.

Ignition interlock devices extended to all first-time impaired drivers.

Republished from the Winnipeg Free Press print edition June 15, 2012 A4