VICTORIA – The Canadian Federation of Independent Business (CFIB) released survey data that shows business owners overwhelmingly oppose a new payroll tax to replace the revenues lost from the elimination of Medical Service Plan (MSP) premiums.
CFIB called for the tax to be scrapped, noting that it will impact more small businesses than the provincial government estimated and that 93 per cent of business owners oppose it.
The government did not take the advice of their own MSP Task Force, but instead rushed to implement the new tax in Budget 2018 last week, putting the cost onto businesses. The tax comes just weeks after the announcement of its aggressive $15/hour minimum wage plan.
The new tax comes into effect on January 1, 2019.
CFIB warned the finance minister in a pre-budget meeting that small and medium-sized businesses do not support using a payroll tax to replace MSP revenues: 85 per cent of small business owners in BC were strongly opposed to a new payroll tax and 8 per cent were somewhat opposed.
Only 3 percent somewhat or strongly supported the tax, while 4 per cent didn’t know/weren’t sure.
Businesses with less than $500,000 in payroll will be exempt from paying the tax, businesses with payrolls between $500,000 and $1.5 million will pay reduced rates, and businesses with more than $1.5 million in payroll will pay the full 1.95 per cent.
There was support in the survey for a small business exemption, at least in principle, with 79 per cent of respondents backing the measure (63 per cent strongly supported, 16 per cent somewhat support).
“We estimate that despite the modest exemption, more than half of our members running small and medium-sized business will pay the new tax. Since only 17 per cent of them were able to afford to pay the MSP premiums for their employees, this is a brand new cost for many”, says Richard Truscott, Vice-President, BC and Alberta.
In addition, some business owners will pay both the new tax and MSP premiums for one year. “This new tax is a double whammy for those businesses owners. This doubling up is doubly wrong. The new tax should not take effect until the MSP premiums are totally phased out,” stated Truscott.
If the BC Government and its MSP Task Force push ahead, CFIB recommends the proposed payroll tax at least be modified by:
- Increasing the exemption (i.e. up to at least $1.25 million of payroll to exempt more small businesses from the new tax);
- Making it graduated. Instead of jumping to the new rate on all previous payroll when you hit a threshold, pay each rate for the payroll in that range;
- Indexing the thresholds to inflation, and
- Ensuring it as easy to administer as possible.
Truscott concluded: “The new payroll tax is poorly designed and will have a big impact for many small businesses. The Government should scrap the tax, or at least go back to the drawing board and make it much more small business friendly”, concluded Truscott.
Survey results were collected from 692 respondents in random-sample, web-access controlled survey of CFIB members conducted in January 2018, just a few weeks before the introduction of the BC Budget.
