Gov’t under fire for tax on health insuranceFriday, March 10, 2017
GOVERNMENT’S plan to impose General Consumption Tax (GCT) on group health insurance premiums to help fill the $13.5-billion gap in the national budget, created by the increase in the income tax threshold, has not gone down well with one of the key players in the industry.
President and Chief Executive Officer of Sagicor Group Jamaica Richard Byles told the Jamaica Observer yesterday that he will be seeking to meet with finance minister Audley Shaw as early as next week to discuss the implications of the tax.
"It’s not a big issue for the insurance companies because it’s a tax that we are going to charge the customer and then remit to Government, so it’s not like we are at risk, but on behalf of the employees of Jamaica we think we should point out to the minister that this is not the right way to go and to encourage him to look somewhere else for that funding," said Byles, former co-chair of the Government’s previous Economic Programme Oversight Committee.
He pointed out that only 30 per cent of the Jamaican work force has health insurance, already making it a premium product. "It’s not a product that every employer and employee can afford. The tax is going to make it 16.5 per cent more immediately. Some companies are going to say we can’t afford it, drop it; some companies are going to say we have to introduce the benefits to accommodate the tax (for example) instead of your dental benefit being, let us say $15,000 per year, they will negotiate with the carrier to drop it to say $10,000. And instead of your drug benefit being $40,000 for the year let’s drop it to $30,000, so they erode the benefits and in that way bring the premiums down to where it was before the tax. That’s not a good thing," he stated.
Byles said some employers may also ask employees to pay for their own health insurance. None of those [options] are any good for the Jamaican employees. Here is a product that is good for our workforce [so] why are we taxing it? Could we not find anything else? We are just making it more difficult for the ordinary person in the workforce to have health insurance," he argued.
He explained that because most plans are shared — costs between the employer and employee — both will bear the increase. "Generally the employee pays for dependents and the company pays for the employee; when the tax is imposed, both will pay 16 and a half per cent more on their premiums than they were before," he noted.
The finance minister announced the revenue measure in his 2017/18 budget presentation in the House of Representatives Thursday. The tax, which is being proposed to start on April 3, is expected to put $1.88 billion into the Government’s coffers. Shaw said the move is in line with the Administration’s shift towards indirect taxes by widening the GCT base.
Yesterday, Opposition Spokesman on Finance Dr Peter Phillips said the imposition of GCT on health insurance premiums, coupled with the imminent pension reform, will have a devastating effect on some of the most vulnerable in the society.
"The Opposition is convinced that the imposition of GCT on Group Health Insurance will put additional burden on the already broken health sector and the poor who are already unable to afford quality health care will have to pay more in a worsened system," Dr Phillips said in a statement commenting on the Government’s tax package.
In the meantime, insurance experts say it is small business operators who will be affected, especially in light of the fact that Jamaicans appear to be adopting an increasingly contract-based work culture. It is also felt that with possible erosion in benefits or some employers opting to eliminate insurance schemes altogether, there could be additional pressure on the public health system.
And Opposition Leader Portia Simpson Miller says she is pleading with the Government to reverse this new unbearable tax package "for only then will Jamaicans truly begin to receive a tax break".
Now you can read the Jamaica Observer ePaper anytime, anywhere. The Jamaica Observer ePaper is available to you at home or at work, and is the same edition as the printed copy available at https://bit.ly/epaper-login