If you currently offer your employees benefits or your business offers private health services (such as dentistry, optometry, etc.), there are some potential changes to income taxes that you should know about.
You may have received a notification recently from your insurance company or your industry association about the Federal Government thinking about making employer-sponsored health and dental benefits a taxable benefit. This has left many wondering what the potential implications could be on their employees, and their business.
What’s the bottom line?
As part of its pre-budget process, the Federal Government was looking at several new taxation measures, including taxing employer-sponsored health and dental benefit plans as income. This would have meant that the amount that an employer would normally spend on health and dental benefits would be added to an employee’s income – increasing their personal tax bill by $1,000 or more in most cases. In Question Period on February 1st, we were encouraged to hear Prime Minister Trudeau’s statement that the government will not move forward with this proposal in Budget 2017.
What are the impacts for small biz?
Being able to offer affordable benefit plans to their employees enables many small businesses to be more competitive on the job market and attract high-quality workers. Insurance plans already cost significantly more for small businesses: fewer employees mean that the health risk pool is smaller, making group benefit plans more expensive.
- If benefits are taxed, it is likely that many employees, particularly younger workers, would choose to drop their coverage, further reducing the risk pool and driving up costs for employers – and it is likely that many would end up cancelling their plans.
As a result, it would be more difficult for small businesses to attract workers, especially when competing with larger firms who have access to health benefit plans at a lower cost due to larger health risk pool.
Evidence from Quebec (where a provincial tax was implemented in 1993) shows that when employer-sponsored health and dental benefits were taxed, 50% of small businesses dropped their coverage due to rising costs. Keep it in mind that any federal taxes on benefits would be in addition to those already in place in the province.
Unfortunately, no one is immune to this proposal
Small business owners who work in fields not covered by public health insurance such as dentistry, optometry, massage and physiotherapy, would also feel the effects of this tax. Since many Canadians can only access these services with the help of their health and dental plans, it is likely that they would either stop or reduce their use of these services if they no longer had coverage through their employer.
As a result, many businesses in these fields may see a decline in their number of patients.
Learn more about the campaign against this tax measure
You can find out more information on making health and dental plans a taxable benefit by visiting http://donttaxmyhealthbenefits.ca/.
How is CFIB working for you?
CFIB is working closely with other organizations and industry associations in order to let the Federal Government know that small businesses can ill afford a tax on health and dental benefits. We sent a letter to the Minister of Finance urging him to reconsider this tax and we have discussed this issue in our meetings with government officials. We will ensure that this proposal remains off the table!
If you have questions, contact a CFIB Business Counsellor at [email protected] or by telephone at 1 888-234-2232.