Effective July 1, 2012, sales tax will be applied to some insurance policies issued in Manitoba.
As part of the province’s 2012 budget, released last week, the Manitoba government said the 7 percent Retail Sales Tax will be applied to property and casualty insurance, group life insurance, trip cancellation insurance, baggage insurance and land titles insurance. Tax will not be applied to health, accident or sickness, Autopac or individual life insurance.
The government said the estimated full-year revenue from these tax sales measures, and the addition of tax on spa treatments (including non-medical skin and nail services, hair services, tattooing and piercing) will result in an additional $106.5 million for the province.
The Insurance Bureau of Canada says by imposing the Retail Sales Tax on home, business and auto insurance policies will hurt Manitobans.
“IBC is very disappointed by this tax decision, which will make insurance – an essential product – less affordable for consumers like homeowners, tenants and business owners,” says Lindsay Olson, Vice-President for Manitoba with IBC.
IBC says the decision is “even more punitive” when one considers that consumers will be paying an effective tax rate of 11.5 percent on insurance premiums.
“The 7 percent will be applied on top of current taxes that include embedded premium taxes and fire tax at 4.25 percent on property insurance. IBC estimates the additional tax will cost Manitoba consumers an extra$48 million based on 2010 premium data,” said an IBC statement.
The new tax will be applied to new and existing policies in place on July 1. “This means that those who have already paid their insurance premium for the period starting July 1st will have to retroactively pay this new tax burden,” said IBC.