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

COVID-19 highlights lack of connectivity in First Nations communities

Many don’t have access required to utilize online platforms, says First Nations Technology Council

BC SPCA team helps discover new feline virus after outbreak at Quesnel shelter

Fechavirus is a kind of parvovirus, which makes cats and kittens very sick

Barriere RCMP hit the trail with BC Conservation Officer Service

Barriere RCMP Detachment Commander, Cpl. Robert Welsman, says he took to back… Continue reading

Plant veggies and enter Barriere Blooms contest

Victory Garden theme gets residents in the dirt

RV habitation once again a discussion topic for TNRD

“I don’t imagine for a moment that we’ve heard the last of the RV issue”

Mission prison COVID-19 outbreak ends, 9 new cases in B.C.

New positive test at Port Coquitlam care home

Man who bound, murdered Vancouver Island teen still a risk to public: parole board

Kimberly Proctor’s killer is still ‘mismanaging emotions,’ has had ‘temper tantrums’

VIDEO: Humpback whales put on quite a show

The ‘playful’ pod lingered by a Campbell River tour operator’s boat for quite some time

Getting hitched at historic B.C. gold rush town still on table during COVID-19 pandemic

Micro-weddings, online visits, offered at Barkerville Historic Town and Park

Revelstoke woman finds welcoming letter on her Alberta-registered truck

There have been multiple reports online of vandalism to vehicles with Alberta licence plates

Spirit bear possibly spotted in West Kootenay

A local resident spotted the white-coloured bear while on an evening trail run near Castlegar on May 27

B.C. businesses ‘can’t shoulder burden’ of COVID-19 sick pay

Trudeau’s plan should be tied to federal emergency aid

B.C. teacher reprimanded for sharing homophobic and sexist memes, making racist comments

Klaus Hardy Breslauer was accused of making a laundry list of concerning decisions as a science teacher

COVID-19: B.C. too dependent on foreign food production workers

New B.C. job site links unemployed with farm, seafood work

Most Read