Manitoba has proposed a 7% retail sales tax (RST) on individual disability insurance, critical-illness insurance and group disability insurance.

“[This tax] will increase the cost to Manitoba businesses, and families trying to protect themselves,” says Frank Swedlove, president of the Canadian Life and Health Insurance Association (CLHIA).

Read: Get volume discounts on insurance

The proposed legislation will apply to premiums associated with disability, critical illness, and accidental death and dismemberment for both group and individual insurance policies. It’ll also apply to group creditor insurance and individual life insurance policies.

If this tax prevents Manitobans from purchasing privately administered DI and CI, the public sector will need to provide additional funding to help them, says Swedlove.

“While it will generate some short-term revenue, it will lead to more government expenditure on health care in the long term,” adds Greg Pollock, president and CEO of Advocis.

Swedlove also argues a tax on group insurance policies will raise costs for Manitoba businesses, negatively affecting their ability to compete with business across the country.

Read: Manulife raises premiums on life and health insurance

The CLHIA says it’s concerned about the lack of consultation with the industry where taxes are considered, calling the change a major expansion from original 2012 budget plans. The government initially announced the tax would only apply to property and casualty, group life, trip cancellation, baggage and land titles insurance, and would not apply to health and disability insurance.

Read: Budget 2012: Reaching for balance

Read: Factor for indirect taxes

Originally published on Advisor.ca