Businesses pay a high price with new payroll tax: budget reaction

Business community worried about impact of picking up $1.92 billion MSP tab

Businesses are paying a heavy price in the provincial NDP government’s budget, say two leading business organizations.

Tuesday’s budget includes a new graduated payroll health tax. It starts at 0.98 per cent for businesses with an annual payroll of $750,000 and builds up to a 1.9 per cent tax on businesses with an annual payroll more than $1.5 million.

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The tax will replace the Medical Services Plan premiums, which will be eliminated as of Jan. 1, 2020.

“This new burden, shifted entirely onto the shoulders of business owners, flies in the face of an innovative economy — a phrase that featured prominently in every ministers’ mandate letter in July, but very little in today’s speech. This new tax will have a negative effect on growth and investment,” Val Litwin, president and CEO of the B.C. Chamber of Commerce, said in a press release.

The chamber says that while provincial budget “reflects a social agenda with meaningful investments in both housing attainability and childcare — two areas of deep interest to the B.C. Chamber network —  it leaves the business community to pick up a $1.92- billion tab on MSP by fiscal year 2020.”

“In doing this, the government will be reducing the tax burden on individuals, by transferring the majority of the $2.6 billion burden onto business,” said a press release from the Greater Vancouver Board of Trade. “Because many larger corporations already pay this on behalf of their employees (as a benefit), the incremental impact of this payroll tax will overwhelmingly affect small-midsize businesses the most.

“In fact, noting that 50 per cent of the MSP premiums have already been eliminated (with the impact being absorbed in ‘general revenues’), the new payroll tax collected will more than make up the remaining MSP revenue shortfall, and is a material contributor to achieving the balanced budgets that are forecast.”

Vancouver Board of Trade 2018 budget report card

While giving the budget an overall C+ grade — compared to an A grade for the Liberal government’s budget in 2017 — the GVBOT gives the NDP a C- when it comes to its cumulative impact on business.

The B.C. Chamber of Commerce says the new tax should be viewed in perspective of other burdens facing business such as the loss of revenue neutrality (and increase) of the Carbon Tax, and increases to minimum wage and the corporate tax rate.

“Businesses of all sizes — from dry cleaners on main street to family logging companies in the interior — are facing the cumulative effect of crippling tax increases that will challenge their ability to invest and grow,” the press release says.

“Our members like to see balanced budgets,” said Litwin, “especially with capital investments in infrastructure, education, trade, and housing that support many businesses in the province through direct and indirect job creation,” said Litwin. “But this budget looks like it’s being balanced on the back of business through accumulating tax increases.”

Employers such as the Vancouver School Board will also feel the impact.

This year, the VSB projected a $1.1-million savings in the first six months of this year in the cost of benefits, due to the Medical Services Plan premiums being cut in half on Jan. 1, 2018. For a full year, that would likely have been about $2.2 million.

Public entities like the VSB, however, will now have to pay the new employee health tax.

With files from Tracy Sherlock.

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