Municipal governments are still going to have to foot the bill for the provincial government’s new employer health tax (EHT). This comes as the province released implementation details of the new tax that starts in 2019 in order to cover the costs of getting rid of Medical Service Plan (MSP) premiums.
Municipalities will no longer have to pay MSP premiums for their employees starting on Jan. 1, 2020. But municipalities will have to pay the tax starting in 2019.
“The calculations we did is even if municipalities took all of the costs of the employers health tax and put it on to home owners you would only be looking at about $20 to $40 per household in additional costs,” said Finance Minister Carole James.
“Most municipalities won’t even look at that because they will be able to absorb those costs.”
Businesses and organizations with payrolls under $500,000 will be exempt from the new tax, but those with payrolls in excess of $500,000 will pay a 0.98 per cent tax, which will gradually increase to 1.95 per cent for payrolls over $1.5 million.
The Union of B.C. Municipalities released a report that found 71 per cent of local governments will see an increase in costs. Among the hardest hit is the City of Vancouver, which will pay $15 million a year in EHT compared to $5 million is MSP premiums for employers.
But the province is providing substantial relief for school districts, colleges and universities, health authorities and social-service providers. The government will cover the $90 million in annual costs from the EHT.
The money is already accounted for in the existing provincial budget. The province is also expecting to save over $50 million a year in administrative costs associated with running the MSP program.
“We are going to cover those costs to protect those important services for British Columbians,” James said. “Those numbers are built into the budget. There is a line that says priorities and cost pressures. We made sure there was a line in there for 2020 and 2021. There is more than $1 billion in each of those years. So that will be well covered.”
B.C. Liberal leader Andrew Wilkinson doesn’t think the provincial government has properly calculated how much the EHT will cost organizations funded by government. Wilkinson estimates the tax could cost the University of British Columbia $23 million alone.
“They haven’t addressed the fact there are hundreds of thousands of people on the government payroll ranging from hospitals to universities to schools. All of them are responsible for the Employers Health Tax,” said Wilkinson. “The money they are providing is not anywhere near enough.”
The government has also announced significant changes to the amount of tax charities and non-profits will be required to pay. Charities and non-profits that have annual payrolls less than $1.5 million will be exempt from the tax, a threshold $1 million a year higher than when the tax was originally announced.
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For payrolls between $1,500,001 and $4,500,000 annually, charitable and non-profit employers will be on the hook for 2.95 per cent tax a year. Payrolls above $4.5 million will have to pay 1.95 per cent.
The province is also allowing charities and non-profits to calculate EHT for each of their locations, so if a child care has four locations, each one will total up its payroll in order to calculate the tax owed.
“In implementing the employers health tax we have said we wanted to focus on affordability,” James said. “Most charities and not-for-profits have payrolls less than $1.5 million so the services will be protected and supported.”