Finance Minister Carole James presents her 2019-20 budget to the B.C. legislature, Feb. 19, 2019. (B.C. government)

Full weight of B.C.’s employer health tax to be felt in 2020

Payroll tax fuels ‘gig economy’ drift away from full-time jobs

The second year of B.C.’s employer health tax to replace Medical Services Plan premiums has arrived, and for many small businesses, 2020 is when they have to write their first cheques.

While larger business and local governments began paying the tax in instalments during 2019, small businesses that just clear the $500,000 payroll threshold have a deadline of March 31 to pay up for last year’s tax. Larger businesses have the same deadline for paying the remainder of their 2019 employer health tax.

Small businesses are least likely to have been paying MSP premiums for their employees, so for them it’s a new payroll cost. The Canadian Federation of Independent Business estimates that more than 40 per cent of small- and medium-sized businesses must pay it. For many it’s on top of higher property taxes, as municipalities raise rates to pass their extra payroll costs on.

The final bills for MSP premiums went out in December, although individuals and businesses are still on the hook for any arrears. The finance ministry also reminds people who have set up bank auto-payments for MSP to cancel those, or they will keep sending money to the province.

The employer health tax was designed to replace MSP revenue, so it’s likely to cost eligible businesses more, than MSP did, says Ken Peacock, chief economist of the Business Council of B.C. That’s because business only accounted for about half of the province’s MSP revenue, with the rest paid directly by individuals.

“The total collection from the employer health tax is about $1.8 billion, climbing to $1.9 billion this year,” Peacock said in an interview with Black Press. “In advance of the employer health tax coming in, people heard about it, but until you write that cheque, that’s when the reality hits.”

In the last days of 2019, B.C. Premier John Horgan touted the elimination of premiums as the biggest middle-class tax cut in B.C. history. That’s disputed by B.C. Liberal leader Andrew Wilkinson, who notes that the Gordon Campbell government reduced personal income taxes by 25 per cent across the board after taking office in 2001.

OUTLOOK 2020: Andrew Wilkinson on taxes, forestry and CleanBC

OUTLOOK 2020: John Horgan on taxes, union labour and ICBC

Both major parties campaigned in 2017 to eliminate MSP, with its collection bureaucracy that was contracted out in 2004 to a U.S. back-office company called Maximus Corp. The NDP and B.C. Liberals both pledged to cut it by half in 2018, but the NDP made no mention of replacing it with a payroll tax as Ontario and Quebec have.

Peacock says the employer health tax adds to rising business taxes, including higher corporate income tax and rising carbon tax that is no longer offset by income tax reductions. Cancellation of the harmonized sales tax and a return to provincial sales tax on business inputs is the biggest hit in recent years, although many people have forgotten the change forced by a petition to defeat the HST in 2010.

Payroll costs and taxes put added pressure on businesses to choose contract labour instead of full-time employment, accelerating an already strong trend to the “gig economy” where people work multiple jobs to pay their bills, Peacock said.

Employer health tax and corporate income tax are an additional burden to the B.C. forest industry, which has laid off employees and contractors across the province. Horgan downplayed the effect in a year-end interview with Black Press.

“Major forest companies would have been paying MSP premiums for their employees anyway, so the employer health tax will be a benefit to them, as they’ll be paying less,” Horgan said. “I don’t believe the employers’ health tax is the problem that the B.C. Liberals make it out to be. What’s more important is that small business operators [below the $500,000 payroll threshold] who had to pay MSP premiums whether they were profitable or not, no longer have to pay those.”

The employer health tax applies at a rate of 2.9 per cent on payroll costs, including salaries and benefits, totalling more than $500,000 in a year. Organizations greater than $1.5 million pay at a rate of 1.95 per cent. Businesses that owe up to $2,925 for 2019 have until March 31, 2020 to pay.

The province is paying the tax for health authorities and school districts, and has given an exemption for non-profit and charity payrolls up to $1.5 million.


@tomfletcherbc
tfletcher@blackpress.ca

Like us on Facebook and follow us on Twitter.

BC legislature

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Surrey bus driver tests positive for COVID-19

Routes he drove have not been disclosed

Surrey mayor denies property tax deferral motion

Councillor’s notice of motion for Surrey property taxes to be deferred until Dec. 2 out of order

Team refunds OK’d for cancelled Surrey Mayor’s Cup soccer tournament

The decision follows the amalgamation of the Central City Breakers club with Surrey Football Club

COVID-19: 4 new deaths, 25 new cases but only in Vancouver Coastal, Fraser Health

A total of 1,291 people have tested positive for the novel coronavirus

COVID-19: Don’t get away for Easter weekend, Dr. Bonnie Henry warns

John Horgan, Adrian Dix call 130 faith leaders as holidays approach

COVID-19: Trudeau says 30K ventilators on the way; 3.6M Canadians claim benefits

Canada has seen more than 17,000 cases and at least 345 deaths due to COVID-19

RCMP call on kids to name latest foal recruits

The baby horses names are to start with the letter ‘S’

As Canadians return home amid pandemic, border crossings dip to just 5% of usual traffic

Non-commercial land crossing dipped by 95%, air travel dropped by 96 per cent, according to the CBSA

Logan Boulet Effect: Green Shirt Day calls on Canadians to become organ donors

While social distancing, the day also honours the 16 lives lost in the 2018 Humboldt Broncos Crash

COMMENTARY: Knowing where COVID-19 cases are does not protect you

Dr. Bonnie Henry explains why B.C. withholds community names

B.C. wide burning restrictions come into effect April 16

‘Larger open burns pose an unnecessary risk and could detract from wildfire detection’

B.C. secures motel, hotel rooms for COVID-19 shelter space

Community centres, rooms reserved for pandemic self-isolation

Most Read