New Employer Health Tax sparks concern

Salmon Arm city councillor worries about local government, small business

Kevin Flynn wants to raise awareness of the B.C. government’s proposed Employer Health Tax and the impact it could have on small businesses and local governments.

The City of Salmon Arm councillor initiated discussion about the tax at Monday’s council meeting, in response to a letter from City of Maple Ridge Mayor Nicole Read, warning the Employer Health Tax (EHT), the province’s intended replacement for Medical Service Plan premiums, would result in a significant cost increase to municipalities when it comes into effect on Jan. 1 2019.

“They’re certainly not eliminating them (MSP premiums), they’re just passing them on to business, local government, school districts and others,” said Flynn.

In 2017, the City of Salmon Arm paid $8,850 in MSP premiums. As of Jan. 1, 2018, MSP was reduced by 50 per cent, and will be eliminated completely on Jan. 1, 2020. At that point, the city estimates the EHT would likely increase its costs by $100,000.

“These are just preliminary estimates as we have not had time to analyze this in any detail,” city administrator Carl Bannister explained via email.

Based on its 2016-17 payroll, School District #83 estimates it will cost an additional $155,250 to eliminate MSP premiums and fully implement the Employer Health Tax (between 2017-2020), and that it will face an additional annual cost of $103,000 when the EHT is fully implemented.

District of Sicamous chief financial officer Kelly Bennett expects the new tax will have a nominal effect in that municipality.

While local governments and districts await further information about the impending tax shift, Flynn is equally concerned with the impact the EHT will have on small business.

“You can’t continually beat up small business without implications in costs, in employee benefits, in pay levels, in number of employees; there’s going to be ramifications because business owners can’t just continue to see increasing costs,” said Flynn.

Related: BC NDP getting employer push-back on health-care tax

According to the B.C. government, the EHT imposed on employers will be based on their payroll. For businesses whose payroll amounts to $500,000 or less, there will be no tax increase and, come 2020, no MSP. For payrolls from $500,000 to $750,000, the EHT will be .98 per cent, gradually increasing every $250,000. Businesses with a payroll of more than $1.5 million will pay a rate of 1.95 per cent of their total payroll, which the B.C. government says is the lowest rate among provinces with a payroll tax.

The B.C. government expects 85 per cent of the province’s businesses won’t have to pay the EHT. This, however, doesn’t diminish Flynn’s concerns.

“The other thing I don’t think a lot of people understand is that lots of employers were already paying MSP premiums for employees, or a portion of them, and that was a taxable benefit under the old legislation,” Flynn told the Observer. “Extended health and dental are not a taxable benefit, so an employer that works with a specialist like me would let the employees pay their B.C. Med, which was going down in cost, and take the same premium and put it towards a tax-free benefit like extended health and dental… Employers have picked up the slack by putting in private health plans and now they’re getting told, you were leaving that for your employees to pay and instead of eliminating it like we promised we’re just going to make you pay it too.”

Not wanting to come across as partisan, Salmon Arm council was reluctant to have a letter written in support of Maple Ridge. But Flynn assures his concerns are non-partisan.

“My frustration is I’m a small business owner and I work with small businesses that employ people and support sports teams and they’re getting hit from all sides with very little ability to do anything about it,” said Flynn.


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