GST Debate Revisited

Canadian Underwriter in January 2006 published an opinion piece by Linden Rees entitled ‘The Great GST Debate.’

I was disappointed that Canadian Underwriter would publish an article with so many flagrant errors concerning the application of GST to the insurance industry.

For example, in commenting on the Canada Revenue Agency (CRA)’s GST policy statement, the author considered the effect of GST being charged to an IME provider for its rental of space on “out-of-town” clinics, in which case the IME provider must also charge and remit GST to its insurance client.

The article states: “This decision means CRA collects GST twice – once for the IME payment that is based on use of premises other than its own, and once again from the work product.” The author obviously fails to recognize the most rudimentary of rules under the GST system: where an IME provider is charging GST on its work product, it claims a full GST input tax credit on its expenses such as the rental of out-of-town premises. Clearly tax is not collected twice in these circumstances.

Later the article goes on to state: “What is the advantage, if any, of using an IME facility that is obliged to charge GST? [Bear in mind also that any GST the end user pays will be entered in the end user’s GST return as an input tax credit; as such, it may be fully recoverable.]” Again, the author fails to understand the very basic principles of the GST tax. For insurers, GST input tax credits are not available; contrary to the article’s statement, GST would not be “fully recoverable,” but in fact would be an added cost to the insurer of 6% (or 14% HST).

Finally, the article appears to make a number of gratuitous comments concerning the value of expert opinions being “reviewed,” as provided for in the CRA’s GST Policy Statement. While it is not for me to say what is the value of a review, it hardly seems appropriate for the author of this article to malign the independence of those vendors who enjoy quality assurance practices from qualified medical professionals.

Indeed, the value of the “GST debate” to the insurance industry and other stakeholders in this field appears to have largely been that the debate triggered an exhaustive review of the IME business in order to determine whether certain providers were engaged in the delivery of “health care,” and were GST exempt, versus other providers who did not meet that standard. In this exercise, the courts and the CRA were presented with years of submissions and briefings from all of the leading members of the medical community – including the Ontario College of Surgeons and Physicians, as well as most other medical governing bodies across Canada. Following the input from these third parties, the CRA reached its conclusions as to the value of the review of reports by licensed physicians so as to treat IME services as health care services versus mere referral or administrative-type services. To this writer, such a process seems to have been a worthwhile exercise and one that should not be readily dismissed by insurers or others in the industry.