British Columbia’s largest 5% of companies to pay 96% of new payroll tax British Columbia’s largest 5% of companies to pay 96% of new payroll tax

British Columbia’s largest 5% of companies to pay 96% of new payroll tax
16 Jul 2018

Only the largest 5% of companies in British Columbia (BC) will be responsible for paying 96% of its new healthcare payroll tax when it takes effect next year, the government has claimed.

An official notice to employers has just revealed that there will be a CAN$1.5 million (US$ 1.14 million) exemption for charities and qualifying non-profit organisations including schools. This exemption is three times that offered to most businesses when the tax was announced in the Canadian province’s budget in February.

While school districts, health authorities and universities will be expected to pay the tax, their budgets will be adjusted to cover the additional costs during the transition period. To reimburse agencies for the cost of the payroll tax, it is estimated it will cost BC CAN$90 million (US$69 million) a year, Surrey Now-Leader reports.

The tax is designed to replace revenue collected from Medical Services Plan premiums, which are paid by individuals and employers. The rate was cut by half last year and is to be eliminated by 2020. It applies to “any entity with a payroll”.

As of January 2019, employers with payrolls of more than CAN$1.5 million (US$1.1 million) will be expected to pay 1.95% of their payroll in taxes. A lower rate applies for payrolls between CAN$500,000 (US$380,938) and CAN$1.5 million. Those below CAN$500,000 are exempt.

Non-profit organisations that are not registered charities will be entitled to the higher exemption level if they operate “solely for social welfare, civic improvement, pleasure or recreation” and for “any other purpose other than profit”. The higher exemption levels will apply to each location of a large non-profit, allowing most to escape additional costs.

The Finance Ministry calculates that with the exemptions, 85% of BC businesses will not pay the employer health tax, and fewer than 5% will pay the full rate of 1.95% a year.

 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.

Only the largest 5% of companies in British Columbia (BC) will be responsible for paying 96% of its new healthcare payroll tax when it takes effect next year, the government has claimed.

An official notice to employers has just revealed that there will be a CAN$1.5 million (US$ 1.14 million) exemption for charities and qualifying non-profit organisations including schools. This exemption is three times that offered to most businesses when the tax was announced in the Canadian province’s budget in February.

While school districts, health authorities and universities will be expected to pay the tax, their budgets will be adjusted to cover the additional costs during the transition period. To reimburse agencies for the cost of the payroll tax, it is estimated it will cost BC CAN$90 million (US$69 million) a year, Surrey Now-Leader reports.

The tax is designed to replace revenue collected from Medical Services Plan premiums, which are paid by individuals and employers. The rate was cut by half last year and is to be eliminated by 2020. It applies to “any entity with a payroll”.

As of January 2019, employers with payrolls of more than CAN$1.5 million (US$1.1 million) will be expected to pay 1.95% of their payroll in taxes. A lower rate applies for payrolls between CAN$500,000 (US$380,938) and CAN$1.5 million. Those below CAN$500,000 are exempt.

Non-profit organisations that are not registered charities will be entitled to the higher exemption level if they operate “solely for social welfare, civic improvement, pleasure or recreation” and for “any other purpose other than profit”. The higher exemption levels will apply to each location of a large non-profit, allowing most to escape additional costs.

The Finance Ministry calculates that with the exemptions, 85% of BC businesses will not pay the employer health tax, and fewer than 5% will pay the full rate of 1.95% a year.

 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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