However, Financial Services Council chief executive Kirk Hope wants the Government to consider whether the economic benefits of making it cheaper for employers to provide their employees with insurance would outweigh the direct costs.
For example, someone with private health insurance might be able to access healthcare more frequently, enabling them to nip health problems in the bud.
They could also be treated for an ailment sooner, enabling them to be more productive and get back to work more quickly.
Wider insurance coverage could also take strain off the public healthcare system.
Hope makes his case as the Government outsources more work to private healthcare providers.
The call also comes as the Inland Revenue reviews FBT settings to try to make them simpler and fairer.
However, Revenue Minister Simon Watts does not appear particularly hot on the idea.
Asked whether he had a view on the pitch, or whether he would consider it, Watts said: “The proposal isn’t part of the Government’s work programme at this point.”
Indeed, the Inland Revenue did not mention exempting insurance in an issues paper on FBT it released in April.
Rather, it explained it doesn’t currently qualify as a “health and safety” exemption, as flu vaccine vouchers do, because health insurance doesn’t relate to a specific health and safety risk in the workplace.
Consultant accountant Geof Nightingale said this wasn’t the first time he had heard calls for insurance to be exempt from the FBT.
He said the idea was generally discarded because of its cost to the Crown.
Nightingale believed it would be easier to make the case from a health policy perspective than from a tax perspective.
Deloitte partner Robyn Walker noted the threshold for tax exemptions were generally high to avoid “slippery slope” situations – an exemption for one thing driving calls for further exemptions.
Walker also questioned whether the exemption would end up benefiting white collar workers the most, whose employers might be more prepared to pay for insurance.
Hope had a different view.
He argued that if large employers of low-paid workers didn’t have to pay tax on top of insurance premiums, they would be more inclined to offer employees cover.
According to the results of a new Financial Services Council survey, 78% of people with life insurance and 56% with health insurance pay for it entirely out of their own pockets.
Affordability is the key issue, with health and life insurance premiums rising at a rate well above the inflation rate.
Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
