BC – The Canadian Federation of Independent Business (CFIB) released a new report, The Employer Health Tax: Room for Remedy, as business owners gear up to pay their first bill on June 15 for the new $2 billion Employer Health Tax (EHT). CFIB warns the new tax will cause major pains for British Columbia’s business community.

To replace lost revenues from the elimination of Medical Service Plan (MSP) premiums, the BC government introduced the EHT. The new tax imposes an additional cost for employers of up to 1.95 per cent on total payroll. Businesses with payroll under $500,000 are exempt from paying the tax. However, CFIB estimates show 75,000 businesses, most of which are considered small, will still have to pay.

“We’re less than a week away from the first payment due date, and little has been done to support small businesses on the hook to pay the new payroll tax,” says Muriel Protzer, Policy Analyst, B.C. and Alberta. “Survey data shows the new payroll tax discourages nearly three out of every four small business from hiring additional employees. As currently designed the tax is seriously flawed,” adds Protzer.

To make the EHT an easier pill to swallow for employers, CFIB recommendations include:

  • Increase the small business exemption (e.g. from $500,000 to at least $1.25 million);
  • Ensure the tax is fully graduated (i.e. keep the tax calculation the same at all payroll thresholds: 1.95% X [payroll – $500,000], and apply the small business exemption to all payroll thresholds);
  • Create a more even split on revenue replacement between businesses and individuals, such that businesses are not having to absorb the majority of the cost to replace MSP revenues.