The Greater Vancouver Board of Trade and the Independent Contractors and Businesses Association (ICBA) are concerned small- and medium-sized businesses will get hit hard by the province’s new Employer Health Tax (EHT).
The report, produced for the organizations by the Mustel Group, found that more than 60 per cent of respondents who are small businesses expect to pay the tax.
“The survey results today confirm what we have heard from our members since the B.C. budget was announced: this unexpected payroll tax will hit small- and medium-sized businesses hard,” said Greater Vancouver Board of Trade CEO Iain Black.
“The fact that this is a tax on the amount of an organization’s overall payroll — before other taxes and any profits — eliminates any option for a business to plan for a lean year.”
LISTEN: Board of Trade says EHT impact to small business will be significant
Businesses with fewer than 50 employees are defined as small businesses in British Columbia.
The B.C. NDP cut Medical Service Plan (MSP) premiums in half last fall and will get rid of them entirely in 2020. The province is putting a health payroll tax in place on Jan. 1, 2019, to pay for the lost revenues.
MSP will be gone on Jan. 1, 2020.
Businesses with payrolls of more than $1.5 million will pay a tax rate of 1.95 per cent on their total payrolls.
Any businesses with payrolls between $500,000 and $1.5 million will pay a reduced rate, and those with payrolls below $500,000 will not pay the tax.
“I understand people are concerned but remember we are eliminating the MSP which is savings and we are bringing in child care and housing which is supporting business, they are programs they have been asking for,” said B.C. Finance Minister Carole James in March.
The report found that 61 per cent of Board of Trade or ICBA members with fewer than 50 employees with pay the tax. Compare that to the 36 per cent of member businesses with fewer than 50 employees that currently pay MSP premiums on behalf of their employees.
Based on the report’s findings, the average annual payroll tax bill is estimated at $157,233. For the 51 per cent of member businesses not currently paying MSP premiums, the additional tax will be an average of almost $135,000. Businesses in the same situation with fewer than 50 employees will pay an average of almost $55,000 more per year. In both those scenarios, the payroll tax is a completely new cost to the business.
WATCH HERE: NDP government under fire again for new payroll tax
“Payroll taxes are job-killers, as they increase the cost of employing people and growing businesses,” said ICBA CEO Chris Gardner. “When you add it to the NDP’s carbon, income and other tax increases, record-high gas prices, cities passing along their own payroll tax costs through higher property taxes, and shaken investor confidence in B.C., it’s perfectly understandable that job creators are reeling. The BC NDP must rethink this tax.”