The “employer health” tax, as it is dubbed by government, requires companies with payrolls over $500,000 a year to pay a 0.98 per cent tax on annual payroll. The tax goes up in increments up for every $250,000 in payroll. Big companies will be hardest hit as they will pay a 1.95 per cent of tax on payrolls over $1.5 million.
Since the government is one of the biggest employers in B.C., the public sector will account for about 20 per cent (ultimately $400 million a year) of the revenue that new tax brings in when fully implemented, Finance Minister Carole James said.
The tax is projected to bring in $463 million in 2018-19 (it applies for only the last three months of that fiscal year), $1.85 billion in 2019-20, and $1.92 billion in 2020-21. MSP premiums brought in $2.6 billion annually in revenue so there will still be a revenue gap to make up.
“The government will be reducing the tax burden on individuals, by transferring the majority of the $2.6 billion burden onto business,” it said in a statement. “Because many larger corporations already pay this on behalf of their employees (as a benefit), the incremental impact of this payroll tax will overwhelmingly affect small to mid-size businesses the most.”
In other revenue-raising measures, the government said it will boost taxes on tobacco in the 2018-19 fiscal year. Based on current tobacco consumption rates, the tax will increase tobacco tax revenues to $822 million in 2018-19, $112 million more than sales tax revenue in the current fiscal year. The percentage increase is said to be about 11 per cent, according to the Ministry of Finance. Before the increase, B.C. lagged most other provinces in tobacco tax rates. The tax rate on loose tobacco will also rise to help close a loophole in which loose tobacco was taxed less than manufactured cigarettes.
B.C. Budget 2018: New payroll tax offsets loss from cancelling medical premiums
