When the clock strikes midnight on Dec. 31 - and after the champagne is poured and the final verse of “Auld Lang Syne” is belted out - many businesses in Burnaby will be faced with the prospect of paying the same tax for provincial health care, twice. And from what I am hearing at the Burnaby Board of Trade, they are none too happy about it.
The Employer Health Tax was introduced February’s budget 2018 and was presented as a way of covering the cost of eliminating Medical Services Plan premiums on individuals and families. Businesses with annual payrolls over $500,000 will pay a tax on the wages of their workers, up to a maximum rate of 1.95 per cent for payrolls over $1.5 million.
However, while the new tax comes into effect in less than two short months, the MSP premiums it is replacing will not actually be eliminated until Jan. 1, 2020. Therefore, families will continue to pay MSP while simultaneously businesses will be charged the new MSP-replacement tax.
An even worse fact is that for organizations which pay MSP premiums on behalf of their employees — and many do as a perk to their staff — they may be faced with paying both taxes next year.
While this double taxation is the most obvious problem with the new tax, it is unfortunately not the only one. That is why from the beginning, the BBOT, on behalf of our members, opposed its implementation and offered amendments to help make it less damaging to small businesses.
Above all other concerns is the fact that it’s a significant new tax burden on businesses who have been faced with everything from increasing payroll taxes and minimum wages to the rising costs of just doing business in B.C. The tax is expected to bring in more money overall than the MSP, which it is “replacing,” and many individual businesses will be paying substantially more than they are paying now to cover their employees’ MSP premiums. I have heard from some Burnaby businesses who are facing new tax bills of thousands, tens of thousands, or in a few cases, hundreds of thousands of dollars.
In addition, the exemption thresholds that are meant to protect small businesses are too low. The provincial government says the tax will not apply to small business, but it only exempts payrolls up to $500,000, or only eight or nine employees. I doubt that many would define a company with 10 or 11 employees as a “big business” and this low threshold means thousands of real small businesses will still have to pay this tax. In some provinces with similar health payroll taxes, the thresholds are set much higher ($1.25 million in Manitoba and $1.2 million in Newfoundland) to allow greater exemptions for small businesses and the province would be wise to follow those examples.
Overall, while the new tax has not gotten the attention in the media of some of the government’s other initiatives, among the Burnaby business community it is well-known as having a much more significant impact. The tax will make hiring and creating jobs more expensive, it will add another layer of cost onto the backs of entrepreneurs, and it hits many of our local companies with an unnecessary double tax they weren’t expecting. For the sake of our members, I hope our provincial government stops the implementation of the Employer Health Taax so that on this New Year’s Eve Burnaby businesses can make a toast to their health, not to their health tax.
Paul Holden is CEO of the Burnaby Board of Trade. He writes in this space once a month.
