B.C. Employers Health Tax set to hit businesses starting on Jan. 1

New year, new taxes.

Businesses across British Columbia are set to start paying the province’s new Employers Health Tax (EHT) on Jan. 1, 2019. The tax is being put in place to cover the costs of Medical Service Plan premiums, but those premiums don’t go away until Jan. 1, 2020.

“The Employer Health Tax will have a cascading effect across the province, putting a chill on new hiring and pay raises and risking property tax hikes from Port Alberni to Prince George,” said Kris Sims, B.C. director of the Canadian Taxpayers Federation.

“This is a huge downloading of taxes from Victoria onto the backs of job creators and municipalities across the province.”

The tax applies to businesses that have an annual payroll of more than $500,000. Registered charities and non-profit employers have special exemptions and will pay a lower tax rate than other businesses.

Municipal governments are still going to have to foot the bill for the provincial government’s new tax. Municipalities will no longer have to pay MSP premiums for their employees starting on Jan. 1, 2020.

WATCH (aired July 4): NDP government backtracks on part of employer health tax

2:05 NDP government backtracks on part of employer health tax

“The calculations we did … even if municipalities took all of the costs of the Employers Health Tax and put it on to homeowners, you would only be looking at about $20 to $40 per household in additional costs,” said Finance Minister Carole James in June.

“Most municipalities won’t even look at that because they will be able to absorb those costs.”

But municipalities are already using the EHT as a reason why property taxes need to go up.

Vancouver is proposing a 4.9-per-cent increase that would amount to an extra $41 next year for the median strata owner, an additional $108 for the median single-family homeowner and a tax hike of $193 for the median business property owner. The EHT will lead to 1.7-per-cent increase in the city’s budget next year.

“While this is an increased cost to the city in 2019, the city can expect a marginal positive financial impact in 2020 upon the elimination of MSP premiums,” states a city budget document.

Jan. 1 also ushers in the new school tax. Homes worth more than $3 million will pay a higher rate, with a 0.2-per-cent increase on the residential portion assessed between $3 million and $4 million and a 0.4-per-cent increase on the portion assessed over $4 million.

Earlier this month, the City of Vancouver sent the province a letter asking it to rescind the tax increase for high-end homes.

“At the core of our request is that the province’s surcharge on the provincial school tax represents an encroachment on the City of Vancouver’s municipal tax base,” reads the letter.

Natural gas prices will going up once the calendar flips to 2019. FortisBC says residential customers will pay nine per cent more a year under new interim rates approved by the British Columbia Utilities Commission. The increase is about $68 more a year for the average annual usage.

Rate increases will also continue through the year.

The carbon tax will go up from $35 a tonne to $40 a tonne on April 1. ICBC rates will also go up at the beginning of April, with the public insurer seeking a basic rate increase of 6.3 per cent.

—With files from Simon Little