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

Correlieu Secondary School students Hanna Fitchett, Justin Pugh and Jaeana Dumais (missing from photo) were recently recognized by the Quesnel and District Arts Council for their poetry submissions to the community writing contest. The students’ work was inspired by the novel Wenjack and the film The Secret Path. (Photo Submitted)
LETTER: Quesnel high school students’ poetry recognized

CSS thanks the Quesnel and District Arts Council and its community writing contest partners

The director of the Wells Snowmobile Club, Dexter Knorr, shared what is in his safety kit when sledding. Included are spare parts for his machine, like sparkplugs, and specially-designed tow ropes. (Submitted Photo)
Wells Snowmobile Club director shares tips for safe sledding

Two Prince George men were recently stranded on Yanks Peak, one overnight

In this file photo from 2019, Tammy Burrows of the Wild Women of the North Society organizes the donations before the group of volunteers begins assembling Christmas hampers Dec. 22 at the Quesnel Tillicum Society Native Friendship Centre. The society is collecting food hamper items again this winter, along with winter clothing and warm gear. (Quesnel Cariboo Observer File Photo)
There are many ways to help fill Christmas hampers in and around Quesnel

Many businesses, volunteers and the RCMP are collecting hamper items over the next few weeks

A masked statue of Billy Barker sits on top of his namesake casino in downtown Quesnel. As we head into the weekend, Northern Health is urging residents to follow all provincial health orders, which include mandatory masks inside all indoor spaces. (Cassidy Dankochik Photo - Quesnel Cariboo Observer)
A masked statue of Billy Barker sits on top of his namesake casino, eight months to the day it was closed to help stop the spread of COVID-19. Owner Brad Kotzer said they won’t be opening in 2020. (Cassidy Dankochik Photo - Quesnel Cariboo Observer)
Northern Health urges residents to respect COVID-19 rules

The number of COVID-19 cases has been growing, and Northern Health saw 35 new cases from Nov. 26-27

Coralee Oakes won 48.42 per cent of ballots in the Cariboo North district in the October election, en route to winning a third term as MLA. (Photo Submitted)
Cariboo North MLA sworn in, despite technical difficulties

Coralee Oakes began her third term as the region’s MLA but couldn’t attend the virtual ceremony

Mary Cox and Jack Plant dance in their pyjamas and slippers at the morning pyjama dance during the Rhythm Reelers’ 25 Annual Rally in the Valley Square Dance Festival in Chilliwack on June 4, 2011. Sunday, Nov. 29, 2020 is Square Dancing Day. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of Nov. 29 to Dec. 5

Square Dancing Day, Disability Day and International Ninja Day are all coming up this week

Black Press Media and BraveFace have come together to support children facing life-threatening conditions. Net proceeds from these washable, reusable, three-layer masks go to Make-A-Wish Foundation BC & Yukon.
Put on a BraveFace: Help make children’s wishes come true

Black Press Media, BraveFace host mask fundraiser for Make-A-Wish Foundation

Kevin Bieksa during his days playing with the Vancouver Canucks. (Photo: commons.wikimedia.org)
Bieksa to guest on free Canucks Alumni ‘Hot Stove’ on Zoom app

Former NHL player has become a game analyst on Sportsnet

114 Canadians were appointed Nov. 27 to the Order of Canada. (Governor General of Canada photo)
Indigenous actor, author, elder, leaders appointed to Order of Canada

Outstanding achievement, community dedication and service recognized

More than 60 cm of snow has fallen at Ulkatcho First Nation near Anahim Lake in the Chilcotin since a snowfall warning went into effect Thursday, Nov. 26. (Graham West photo)
VIDEO: More than 60 cm of snowfall in Chilcotin since Thursday, Nov. 26

Graham West of Ulkatcho First Nation captures the scene on video

Screenshot of Pastor James Butler giving a sermon at Free Grace Baptist Church in Chilliwack on Nov. 22, 2020. The church has decided to continue in-person services despite a public health order banning worship services that was issued on Nov. 19, 2020. (YouTube)
2 Lower Mainland churches continue in-person services despite public health orders

Pastors say faith groups are unfairly targeted and that charter rights protect their decisions

A big job: Former forests minister Doug Donaldson stands before a 500-year-old Douglas fir in Saanich to announce preservation of some of B.C.’s oldest trees, July 2019. (B.C. government)
B.C. returning to ‘stand-alone’ forests, rural development ministry

Horgan says Gordon Campbell’s super-ministry doesn’t work

Peter Wilson, left, and Micah Rankin, right, formed the Special Prosecutor team that was tasked with reviewing and litigating charges stemming from the Bountiful investigation. Trevor Crawley photo.
End of Bountiful prosecution wraps up decades of legal battles

Constitutional questions had to be settled before a polygamy prosecution could move forward

Alexandre Bissonnette, who pleaded guilty to a mass shooting at a Quebec City mosque, arrives at the courthouse in Quebec City on February 21, 2017. THE CANADIAN PRESS/Mathieu Belanger - POOL
Court strikes down consecutive life sentences; mosque shooter has prison term cut

The decision was appealed by both the defence and the Crown

Most Read