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

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

Vintage scrapbooks gave way to Instagram and Facebook. (Photo: Ursula Maxwell-Lewis)
COLUMN: Prince Philip just got on with it—to our surprise

Ursula Maxwell-Lewis reflects on the passing Prince Philip, Duke of Edinburgh

CBSA seized 64 bricks of suspected cocaine at a border crossing in the Pacific Highway District. (CBSA photo)
$3.5 million worth of suspected cocaine bound for Canada seized in Pacific Highway District

Tractor-trailer hauling personal care products included 64 bricks of suspected coke

A bowl from Obey Poke, part of Joseph Richard Group’s Meal Ticket Brands launch in 2019. The program is now known as Canteen: A Virtual Food Court, at wearethecanteen.ca. (file/submitted photo)
On #TakeoutDay, Surrey restaurants urge direct meal orders, not second-party delivery

Dowtown Surrey BIA says ‘we can help support restaurants that already have a lot on their plates’

Parliament Hill is shown in Ottawa on Wednesday, March 11, 2020. The Trudeau government has agreed with the Senate that Canadians suffering solely from grievous and irremediable mental illnesses should be entitled to receive medical assistance in dying — but not for another two years. (THE CANADIAN PRESS/Sean Kilpatrick photo)
Self-advocates ‘sad, scared, angry’ over revisions to assisted-death legislation

Bill C-7 was expanded to include access to medically assisted death for non-terminal conditions

Police barricade (File photo: Tom Zytaruk)
Surrey RCMP investigate shooting overnight at Whalley motel

Sergeant Elenore Sturko said a 38-year-old man was taken to hospital suffering from a serious injury

(Vancouver Police Department)
8 people arrested after anti-pipeline protestors chain themselves to Vancouver buildings

Cst. Tania Visintin said demonstrators caused ‘a serious safety hazard’ for hours Wednesday

Jamie Coutts recorded a man following her around downtown Vancouver for a half-hour on Wednesday, March 18. (Instagram screenshot/Iammjammbamm)
Man charged in alleged high-profile Vancouver stalking case that went viral online

Man faces five other charges including criminal harassment and assault with a weapon

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

A new Lower Mainland study will examine feline COVID-19 transmission using data gathered from up to 40 cats living with newly infected adults. (Pixabay)
CDC conducting mobile kitty COVID tests outside of Lower Mainland homes

Researchers are probing whether humans can transmit the coronavirus to household pets

A sea lion swims past the window of an empty viewing area Vancouver Aquarium is pictured Thursday, September 10, 2020. The Vancouver Aquarium has had to close its doors to the public due to the lack of visitors during the COVID-19 pandemic. THE CANADIAN PRESS/Jonathan Hayward
U.S.-based theme park company buys Vancouver Aquarium

Aquarium had to shut its doors in September due to COVID pandemic

A man wears a protective face covering to help prevent the spread of COVID-19 as he walks past the emergency entrance of Vancouver General Hospital in Vancouver, B.C., Friday, April 9, 2021. THE CANADIAN PRESS/Jonathan Hayward
COVID-19 spike in B.C. could overwhelm B.C. hospitals: modelling group

There are 397 people are in hospital due to the virus, surpassing a previous high of 374 seen in December

A deep cut on a humpback whale is shown in this recent handout photo in the Vancouver area. A conservation organization is warning boaters to be extra careful to prevent further harm to an injured humpback whale swimming in the Vancouver area. THE CANADIAN PRESS/HO, Ocean Wise, Vanessa Prigollini *MANDATORY CREDIT*
Boaters urged to use caution around hurt humpback off Vancouver

Ocean Wise says watchers first noticed the wound 3 days ago and believe it was caused by a vessel strike

Most Read