Small enterprises, consumers, and employees could face additional costs and consequences
British Columbia’s Employer Health Tax (EHT), which replaces payments to the province’s Medical Services Plan (MSP), could put a squeeze on small- and medium-sized enterprises, as well as consumers and employees.
The EHT replaced MSP payments, which were paid by individuals as well as businesses. With the elimination of the MSP premiums on January 1, the burden of paying for B.C.’s healthcare has fallen on the shoulders of businesses with payrolls greater than half a million dollars, reported CBC News.
For some small-business owners, the EHT represents a new expense with ramifications for employees. “I think it's going to restrict pay increases. It's going to restrict hiring,” said Amy Robinson, executive director for non-profit LOCO B.C., which represents local businesses in the province.
Speaking to CBC News, Robinson claimed to have spoken to a business owner who fell just below the $500,000 payroll threshold. A small raise for all her employees or one new hire, Robinson said, is all it would take to put the woman over the edge, at which point she’d be saddled with an additional $14,000 in tax per year.
The EHT will also affect businesses with larger payrolls, Robinson said. Some local manufacturers reportedly have to pay $30,000 yearly on the tax, handicapping their efforts to compete against multinational companies.
In an emailed statement to CBC News, the province’s Ministry of Finance said it was the last province to institute healthcare premiums. It added that B.C.’s EHT rate is the lowest in Canada among province’s with a payroll tax, and more than 85% of businesses in B.C. are exempt from paying it.
“Employers had a year's notice to plan and budget for the EHT, and organizations can use the savings from the 50 per cent cut to MSP premiums in 2018 and 2019 to help offset EHT costs,” the statement said.
Still, that’s cold comfort to entrepreneurs like Louise Schwartz, co-owner of waste-management company Recycling Alternative, who CBC News reported is expecting an additional $45,000-per-year tax hit.
“For a small, medium-sized business, margins are thin as it is,” Schwartz said, explaining that costs will have to be passed on to consumers or employees as business owners have to protect their profits. “And then to add that now to what we're looking at has a really big impact.”
