Manitoba Premier Brian Pallister is up for re-election this fall. He recently announced that, if elected, the province will no longer charge sales tax on home or renters insurance. If this comes to pass, Manitoba will join a number of other provinces, such as Saskatchewan and Newfoundland and Labrador, getting rid of some taxes on some insurance products.
Consumers might be surprised to learn how much tax they pay on insurance. Across the country, policies of different types are often subject to retail sales tax (RST), but many provincial governments are making changes. That follows pressure from the insurance industry to reduce taxation rates on their products.
There was no tax on home insurance in Manitoba until 2012. That's when the provincial government made policies subject to RST, which was 8% at the time. The RST was later reduced to 7%. The new promise would mean reverting back to RST-free home insurance for Manitobans.
As in most provinces, insurance taxes are complicated in Manitoba. A section of the Retail Sales Tax Act goes on for a few pages describing which policy types are taxable and which are not. Trip cancellation insurance is taxable, while trip interruption insurance is not. Life insurance and health insurance are not taxable. The changes pledged by Pallister depends on his re-election in September.
The news out of Manitoba follows similar moves by other provinces. Newfoundland and Labrador is currently working on scrapping its tax on auto insurance. Saskatchewan removed the provincial sales tax on life and health insurance premiums. Ontario does not charge tax on auto insurance.
Consumers see the provincial sales tax that is applied to insurance premiums. But they may not realize that insurers also pay a separate tax on their products. This is called the provincial insurance premium tax (IPT) and is bundled as part of the cost to the consumer. A C.D. Howe Report from October 2018 found the IPT ranged from 2% to 5% in 2017.
The exact percentage depended on the type of insurance. Eight provinces and territories charged an additional 1% to 1.25% fire premium tax on top of this 2% to 5%. That report said the high tax rates contribute to additional costs borne by consumers. Those consumers may purchase inadequate insurance as a result. For that reason, C.D. Howe encouraged provinces to rethink the tax regime.
You may not be able to escape taxes, no matter where in Canada you live. But you have many options when it comes to finding affordable premiums on insurance. Check out Rates.ca for the latest prices on home, travel and car insurance.