Concerns growing from small businesses over the Employer Health Tax

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WATCH: Small businesses say new health tax wiping out profits – Mar 25, 2019

Some small businesses in British Columbia are having to make the tough decision over cutting staff, passing on costs to consumers or — in the worst case — closing down because of the province’s new Employer Health Tax.

But Finance Minister Carole James says the tax has taken small businesses into consideration, and that it is planning any additional changes.

Lisa Beecroft, the owner of Gabi and Jules bakery in Port Moody, is still calculating the impact of the tax on her bottom line. Beecroft and her husband own the bakery and three coffee shops.

The four storefronts combined have led the business to have a payroll high enough that it must pay the tax.

“It has created a lot of anxiety for us on how we are going to cover that cost,” Beecroft said. “We are really looking internally to see what we can cut and what we can bring in house.”

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READ MORE: Municipalities still on the hook for employer health tax as province finalizes rules

“Inevitably we are going to have to raise the cost of our products for our customers. That is obviously a challenge. There is a threshold there. We have to engage in all elements of our business to make sure we can survive.”

B.C.’s NDP government cut Medical Service Plan (MSP) premiums in half last fall and will get rid of them entirely in January 2020. The province put in health payroll tax in, effective Jan. 1, 2019, to pay for the lost revenues.

Businesses with payrolls of more than $1.5 million must now 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.

Beecroft says her businesses are also dealing with increased labour costs because of an increase in the minimum wage. There is also frustration over double dipping from the province, where it collects both MSP premiums and the new tax this year.

READ MORE: B.C. Government ignores advice from MSP task force, brings in payroll tax

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“We did not get a lot of information of how it is going to roll out and when we are going to start paying for it,” Beecroft said. “What people are forgetting [is] it is just not corporations that are paying for it. It is small family businesses that are really feeling the impact of these taxes. We are just getting hit on a lot of fronts.

“You can only pass on so much to your customers. It is not like they are getting significant raises.”

The provincial government has made changes to the tax, including a reduced rate for businesses with payrolls between $500,000 and $1,500,000. Non-profits and charities have also been exempted from the tax.

“That is why we also lowered the small business corporate tax rate in our first budget. We are always looking at our competitiveness and listening to small businesses,” James said.

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