BC government tax plans to 'disproportionately hit' SMEs BC government tax plans to 'disproportionately hit' SMEs

BC government tax plans to 'disproportionately hit' SMEs
01 Mar 2018

Business groups in Canada’s British Columbia (BC) have criticised the government’s plan to transfer nearly C$2 billion (US$1.57 billion) in Medical Services Plan (MSP) costs to small and medium-sized enterprises (SMEs) through a new payroll tax.

According to Business Vancouver, the BC government proposes to increase spending by C$5.2 billion (US$4.1 billion) over the next three years, but intends to balance its books by introducing a suite of new taxes or tax hikes worth C$4.4 billion (US$3.5 billion). Revenues from new taxes in the first fiscal year would amount to C$880 million (US$692 million), soaring to C$2.2 billion (US$1.73 billion) in 2019-2020 once the payroll tax is fully implemented.

But the Greater Vancouver Board of Trade (GVBOT) has mixed feelings about the proposals.

Chief executive (CEO) Iain Black said: "We certainly applaud government’s efforts on easing the burden of high housing costs and increasing access to child care, but in introducing a payroll tax to offset lost MSP premium revenues, this budget delivers another meaningful blow to small to medium employers, especially in the service and technology sectors."

"Our initial assessment is that this new tax will increase overall payroll costs for our members by several hundred million dollars a year," added Greg D'Avignon, CEO of BC’s Business Council.

Expecting the business sector to pay close to C$2 billion (US$1.57 billion) for the new payroll levy, together with a new employer health tax, will translate into a significant new tax burden for many companies.

Larger employers tend to cover MSP premiums already so when they are replaced with a payroll tax, the impact is expected to be negligible. But most SMEs either do not pay them, or only pay part, which means a payroll tax is likely to affect them most.

"We also note with concern that the new small business payroll tax comes on top of previously announced minimum wage increase of 34% over four years; an increase in the general corporate tax rate of 9.1%; a 14% increase to the personal income tax rate of most ‘skilled professionals’ and a previously scheduled increase in the B.C. carbon tax of 16%," GVBOT said.

Surrey Board of Trade CEO Anita Huberman indicated that she appreciated the state government’s efforts to keep the budget balanced and ensure financial stability for the next two to three years. But she added: "Balancing the budget through increasing business-focused taxes, such as the new Employer Health Tax, will be a hard sell to our members."

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

Business groups in Canada’s British Columbia (BC) have criticised the government’s plan to transfer nearly C$2 billion (US$1.57 billion) in Medical Services Plan (MSP) costs to small and medium-sized enterprises (SMEs) through a new payroll tax.

According to Business Vancouver, the BC government proposes to increase spending by C$5.2 billion (US$4.1 billion) over the next three years, but intends to balance its books by introducing a suite of new taxes or tax hikes worth C$4.4 billion (US$3.5 billion). Revenues from new taxes in the first fiscal year would amount to C$880 million (US$692 million), soaring to C$2.2 billion (US$1.73 billion) in 2019-2020 once the payroll tax is fully implemented.

But the Greater Vancouver Board of Trade (GVBOT) has mixed feelings about the proposals.

Chief executive (CEO) Iain Black said: "We certainly applaud government’s efforts on easing the burden of high housing costs and increasing access to child care, but in introducing a payroll tax to offset lost MSP premium revenues, this budget delivers another meaningful blow to small to medium employers, especially in the service and technology sectors."

"Our initial assessment is that this new tax will increase overall payroll costs for our members by several hundred million dollars a year," added Greg D'Avignon, CEO of BC’s Business Council.

Expecting the business sector to pay close to C$2 billion (US$1.57 billion) for the new payroll levy, together with a new employer health tax, will translate into a significant new tax burden for many companies.

Larger employers tend to cover MSP premiums already so when they are replaced with a payroll tax, the impact is expected to be negligible. But most SMEs either do not pay them, or only pay part, which means a payroll tax is likely to affect them most.

"We also note with concern that the new small business payroll tax comes on top of previously announced minimum wage increase of 34% over four years; an increase in the general corporate tax rate of 9.1%; a 14% increase to the personal income tax rate of most ‘skilled professionals’ and a previously scheduled increase in the B.C. carbon tax of 16%," GVBOT said.

Surrey Board of Trade CEO Anita Huberman indicated that she appreciated the state government’s efforts to keep the budget balanced and ensure financial stability for the next two to three years. But she added: "Balancing the budget through increasing business-focused taxes, such as the new Employer Health Tax, will be a hard sell to our members."

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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