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Health benefits tax could see Canadians pay additional $1,000 a year: study

According to a new report, Canadians could pay more than $1,000 in taxes on their health benefits if they get taxed in the next budget. (Getty)
According to a new report, Canadians could pay more than $1,000 in taxes on their health benefits if they get taxed in the next budget. (Getty)

If health and dental plans are taxed at the federal level, millions of Canadians could end up paying at least $1,000 more for their benefits.

That’s according to a new study conducted by the Conference Board of Canada on behalf of the Canadian Dental Association, the National Post reports.

The study, which has yet to be released, found that a full-time employee in Ontario with benefits who earns $45,000 annually can expect to pay an additional $1,167 in tax.

In Quebec, where medical benefits are already subject to a provincial tax, someone making $90,000 would pay a total of $1,729 in tax on health and dental benefits. An Ontarian making $90,000 would pay $1,277 more in tax, which is in line with what the rest of the provinces would pay should the levy come into effect.

Approximately 13.5 million Canadians have health and dental plans, so a plan to tax benefits would result in roughly $2.9 billion in additional taxes for the government, the Post reports.

Health and dental plans in Canada are currently not subject to tax, unlike most employee benefits, and the issue of their taxation in the upcoming spring budget was first raised last month. Arguments have been made on both sides, however the government has yet to weigh in on the discussion, neither confirming nor denying the potential for a new tax on health and dental plans when the new budget drops, likely in late February or early March.

Proponents for the tax suggest that the move would be in line with the election promise by the Liberals to reduce tax credits offered to higher-income earners. In response to a request for information on the proposed tax credit, CTV reports they received a statement from the Ministry of Finance stating any changes will “have middle class families in mind.”

Some of the most vocal opponents of a proposed tax on benefits have been professional associations representing practitioners within the medical industry, including the Canadian Dental Association, the Canadian Association of Occupational Therapists, the Canadian Association of Optometrists, the Canadian Chiropractic Association, the Canadian Dentist Hygienists Association, Canadian Psychological Association, Dieticians of Canada and Speech-Language & Audiology Canada.

“Taxation of these benefits will have huge impacts on access to care,” said Ondina Love, CEO of the Canadian Dental Hygienists Association said in a press release.

“When benefits were subject to provincial income tax in Quebec in 1993, almost 20 per cent of employers dropped their coverage, including up to 50 per cent of small employers.”

The coalition of professional associations have launched the Don’t Tax My Benefits! campaign, urging Canadians to write to their local members of parliament in defence of keeping health and dental benefits tax-free. According to the Canadian Dental Association, 50,000 letters have already been sent.