The second year of B.C.B次元官网网址檚 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 yearB次元官网网址檚 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 itB次元官网网址檚 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 itB次元官网网址檚 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 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.

After US cut corporate tax by 40%, here's graph of what B.C. is doing on business taxes

B次元官网网址� Tom Fletcher (@tomfletcherbc)

The employer health tax was designed to replace MSP revenue, so itB次元官网网址檚 likely to cost eligible businesses more, than MSP did, says Ken Peacock, chief economist of the Business Council of B.C. ThatB次元官网网址檚 because business only accounted for about half of the provinceB次元官网网址檚 MSP revenue, with the rest paid directly by individuals.

B次元官网网址淭he total collection from the employer health tax is about $1.8 billion, climbing to $1.9 billion this year,B次元官网网址� Peacock said in an interview with Black Press. B次元官网网址淚n advance of the employer health tax coming in, people heard about it, but until you write that cheque, thatB次元官网网址檚 when the reality hits.B次元官网网址�

In the last days of 2019, B.C. Premier John Horgan the elimination of premiums as the biggest middle-class tax cut in B.C. history. ThatB次元官网网址檚 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:

OUTLOOK

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 B次元官网网址済ig economyB次元官网网址� 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.

B次元官网网址淢ajor forest companies would have been paying MSP premiums for their employees anyway, so the employer health tax will be a benefit to them, as theyB次元官网网址檒l be paying less,B次元官网网址� Horgan said. B次元官网网址淚 donB次元官网网址檛 believe the employersB次元官网网址� health tax is the problem that the B.C. Liberals make it out to be. WhatB次元官网网址檚 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.B次元官网网址�

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.

tfletcher@blackpress.ca
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