The payroll tax announced in the recent B.C. budget is causing some concern for many employers, including local governments, but those in municipal finance departments say they are still waiting to hear from the provincial government how the tax will be rolled out.
The new “employers health tax” takes effect Jan. 1, 2019. It will apply to businesses with annual payrolls of more than $500,000, some of which now pay Medical Services Plan premiums on behalf of their employees.
The tax rate is 1.95 per cent for businesses with payroll above $1.5 million, with reduced rates for payrolls between $500,000 and $1.5 million.
Lucky Butterworth, Parksville’s director of finance, said he’s done some preliminary math, but he doesn’t have all the details on how the provincial government is going to calculate the payroll tax.
“My initial calculations, using 2017 payroll, would see about a $10,000 increase from what we’re paying under MSP before they cut it in half,” said Butterworth, adding that in 2017, the provincial government hadn’t cut the premiums in half yet.
In 2017, Butterworth said, the city’s payroll was around $5.9 million.
“That calculates to about $115,000 based on the tax on the 2017 amount. Our MSP for 2017 was around $107,000. There’s a little increase there in the amount we’ll end up paying over this.”
Qualicum Beach finance director John Marsh said while he hasn’t “crunched all the numbers yet, ” he expects the town would pay similar to the City of Parksville.
Like Butterworth, Marsh said he is still waiting to hear details from the government how this tax will be rolled out.
At the Regional District of Nanaimo, acting general manager of corporate services Wendy Idema said she hasn’t done any calculations “because the province hasn’t said which payroll it would be calculated on, so it’s kind of hard to judge that number.”
“It depends on if every single thing is included, including taxable benefits and stuff like that, or if it’s just your straight payroll.”
Idema said in 2018, the RDN will pay around $220,000 in MSP premiums.
Since small businesses that have a payroll less than $500,000 will be exempted from the tax, Butterworth said he wondered if the government would exempt all businesses from the first $500,000.
“I don’t know if we’re exempt on our first $500,000 of payroll in order to put it on a level playing field with small businesses,” he said. “So, does that mean we don’t pay it in the first $500,000 and then we pay it on the next ($500,000)?”
Butterworth also said since there is a reduced rate from $500,000 to $1.5 million, he wondered how that would come into play for the tax.
Businesses that pay employees’ MSP, at a rate that was cut by half at the start of 2018, will also pay the payroll tax for a year, before MSP is ended on Jan. 1, 2020. People who pay their own MSP will save an average $900 per year for individuals and $1,800 for families when MSP is eliminated.
Finance Minister Carole James said the payroll tax is similar to what other provinces have done, adding B.C.’s payroll tax has a lower rate than those in Ontario, Quebec and Manitoba.
— with files from Tom Fletcher