New employer tax unveiled in BC Budget; Small business exemption too low;

Budget documents indicate MSP Task Force leaning toward also adding a new personal income tax surcharge in final recommendations
VICTORIA, February 20, 2018 - The Canadian Federation of Independent Business (CFIB) reacted with cautious optimism to today’s BC balanced Budget, but is concerned the threshold to be exempt from the new employer payroll tax for small business is too low. 

The new tax is intended to cover the cost of eliminating revenues for Medical Service Plan (MSP) premiums. The Budget Update last September announced a 50 per cent reduction in the premiums that took effect on January 1, 2018.  In the 2018 Budget released today, the government reaffirmed it will eliminate the remaining MSP premiums as of January 1, 2020. 

To help replace the revenue, the BC Government announced in the 2018 Budget today, it is introducing a new 1.95 per cent employer payroll tax.  Business with less than $500,000 in payroll will not pay the tax while business with payrolls between $500,000 and $1.5 million will pay reduced rates.  The new tax is expected to generate $1.9 billion in revenue a year once implemented on January 1, 2019.

“The government is wise to exempt the smallest businesses from paying this new payroll tax, especially at a time when so many are struggling to pay for a long list of other new government mandated costs, including rapidly rising minimum wages and higher carbon taxes,” said Richard Truscott, Vice-President, BC and Alberta.

Truscott noted that businesses with payrolls above the $500,000 threshold, many of which would have approximately 10 to 20 employees and still be considered small, will have to pay the new tax.

“A better approach would have been to move that payroll threshold up to at least $1 million and exempt more small firms from this added new payroll cost.  In the coming months, we will be focused on working with the BC Government to extend the threshold and provide relief from the new tax for more small businesses” said Truscott.

He concluded by stating: “Sadly, this may not be the end of the revenue swap story.  The multi-year Budget and Fiscal Plan released today indicates the MSP Task Force is leaning toward also including a new personal income tax surcharge in its final recommendations to government.  We will be closely monitoring this to see if any additional tax-generating measures that would adversely impact entrepreneurs are recommended for future budgets.”  

For more information, or to arrange an interview with Richard Truscott, Vice-President, BC and Alberta, please call 604-684-5325.

CFIB is Canada’s largest association of small- and medium-sized businesses with 110,000 members across every sector and region, including 10,000 in B.C.