Employers welcome increase in health-tax exemption threshold
The biggest bonus to small businesses in B.C. in Thursday’s budget was an increase to the threshold at which employers become exempt from paying a health tax on their payroll.
As of Jan. 1 of this year, the total payroll to qualify for the exemption moved up to $1 million from $500,000.
The annual tax on an employer’s remuneration came into effect after the province eliminated premiums paid by individuals for the Medical Services Plan.
To recoup that money, the province introduced the employer health tax, exempting only employers with annual payrolls of less than $500,000. It came into effect in 2019, prompting an outcry from businesses.
Finance Minister Katrine Conroy said the tax change means 90 per cent of businesses will now be exempt, noting small businesses have been squeezed by rising inflation and high interest rates.
Business groups didn’t get all that they had asked for, but are welcoming the increase in the payroll threshold.
Jeff Bray, executive director Downtown Victoria Business Association, said the group had asked for the threshold to be raised to $1.5 million, but raising it to $1 million is still a positive move. “It will make a difference for lots of small and mediumsized businesses, so we applaud that.”
The move shows the government recognized the tax burden on businesses, Bray said.
Ken Peacock, senior vicepresident and chief economist of the Business Council of B.C., said anything to reduce payroll and hiring costs will help small and medium-sized businesses.
Peacock said there’s been “very, very weak” private-sector job growth in B.C. over the past several years compared with other provinces, which he blames, in part, on the “rapid increase” in payroll costs since 2017, including the employer health tax.
Peacock said he would have preferred to see broader-based tax cuts through all industry sectors.
“This is really only going to benefit the smaller operators. I think we are in a circumstance where we really need to encourage job growth and investment right across the economy.”
Bruce Williams, chief executive of the Greater Victoria Chamber of Commerce, said he welcomed the increased exemption, saying the organization had called for a higher exemption since the tax was first introduced.
The Chamber would like to see the exemption increased to $2 million to include even more businesses, he said.
“The experience in other provinces has shown we can expect an increase in productivity as employers have more room to increase wages and promote staff,” Williams said.
“A healthy economy needs new jobs to come from the private sector and not be so reliant on adding more government workers. Reducing the burden on business is a smart investment.”