Payroll tax could be final blow for some businesses

Many B.C. businesses are still reeling from the blindside hit of a $4.2-billion payroll tax inflicted out of nowhere by Finance Minister Carole James in her Feb. 20 budget.

The new “employer health tax” replaces unpopular Medical Services Plan premiums, which the NDP promised during last year’s election to phase out.

For the significant number of businesses (generally large ones) that paid their employees’ MSP premiums as a workplace benefit, the new tax is roughly a wash: one business expense is eliminated, while a new one takes its place.

But for other businesses (generally small ones) that did not pay their employees’ MSP, the new tax is a brand-new input cost.

For many small businesses already struggling to survive, the new tax could be a fatal blow, warns Ian Tostenson, president of the B.C. Restaurant Association.

The new tax is payable by businesses that have more than a $500,000 annual payroll, hitting about half of the province’s 12,000 restaurants, Tostenson estimates.

“Most of those never paid MSP premiums to begin with, so this is an entirely new cost,” he said.

Meanwhile, the government has also increased the minimum wage by 11 per cent, with plans to increase it further to $15 an hour, also slamming restaurants whose employees typically get paid minimum wage plus tips.

“It’s a double hit, and CPP is going up too,” he said.

“What I feel really bad about are the independent restaurants. They’re the ones who don’t have the benefits of bulk purchasing power. When you’re a marginal operator in this industry, you’re probably not going to be able to survive this stuff.”

Other restaurants may be forced to simply pass the additional costs along to their customers in the form of increased menu prices.

Tell me again how this government is making life more affordable for people? Meanwhile, the B.C. Liberals have been coming to question period every day with a lengthening list of businesses sounding the alarm about the new tax.

“This new tax is going to result in fewer jobs for small businesses in every community across the province,” Liberal MLA Todd Stone said Monday.

The tax is also set to hit public-sector bodies like school boards and non-profit agencies, too.

“We’re hearing concerns about everything — from impact on businesses’ bottom line to the ability of the public service to provide services,” said Green party leader Andrew Weaver.

Despite the growing volume of the grumbling, James is standing her ground. She said while the government is always “monitoring” the impact of tax changes, she is not planning to scale back the new employer health tax.

And she said restaurants shouldn’t worry.

“Once the MSP is gone, that’s a huge savings for individuals and families. People will spend those savings in small businesses, including restaurants.”

Thousands of B.C. restaurants getting walloped with a new payroll tax with no warning may not see it as such a great opportunity.