B.C.’s new Employer Health Tax scheduled to be effective Jan. 1, 2019 has surprised the District of Saanich. Black Press File.

Saanich councillor speaks ill of new health tax

Saanich has not yet ratified the 2018 tax bylaw, but attention has already turned towards 2019, when a new payroll tax comes into effect.

Valla Tinney, Saanich’s director of finance, said the municipality must raise an additional $1.78 million in 2019 to cover the costs of the Employer Health Tax (EHT) scheduled to come into effect Jan. 1, 2019. “This equates to 1.3 per cent [property] tax increase, 0.4 per cent water rate increase and 0.2 per cent sewer rate increase. In future years, the impact will be tied to collective agreement increases.”

Tinney said these rates reflect differences in payrolls across municipal services. “We cannot expense health tax on employees funded through the general fund to sewer or water,” said Tinney. “Only health tax associated with staff costs for those who perform utility functions can be collected through water or sewer user fees. This is the nature of utility.”

In short, Saanich residents will not only pay higher property taxes, but also more for water and sewer to help finance the provincial health care system.

The EHT offsets revenues lost by the pending elimination of Medical Services Premiums (MSPs) effective January 1, 2020. MSPs are monthly personal contributions to the provincial health care system and British Columbia currently remains the last Canadian province to charge this form of flat tax. The government exempts individuals with low incomes and a number of private employers cover MSPs.

While individual taxpayers pay MSPs, businesses pay the EHT if their payroll exceeds $500,000. The tax rate will start at 0.98 percent for annual payrolls in excess of $500,000 and will gradually increase to 1.95 percent for B.C. payrolls in excess of $1,500,000 per year.

Saanich has about 1,600 employees, including fire and police officers, with a payroll of $89.348 million based on 2017 figures.

While the tax will not impact this year’s budget, it will require the District to find additional revenues (or corresponding cuts) next year.

Political reactions have already arrived.

“It is noble that the BC government wants to find a way to eliminate MSP premiums, something only BC had in all of Canada,” said Coun. Colin Plant in a Facebook post. But the impact on Saanich represents an “immense amount of money” that Saanich now needs to find on short notice. “While some employers (like Saanich) were already contributing to the MSP of employees, this new tax ramps up it up unreasonably quickly,” he said.

Forcing school districts, local governments and businesses to pay for the province’s tax policy decisions is not fair and is something that should be reconsidered, said Plant in pointing to a motion from the Association of Vancouver Island and Coastal Communities.

It calls on the Union of British Columbia Municipalities to meet with the provincial government and suspend the introduction of the tax until after consultation had occurred.

“Simply put, we deserve to have a conversation before we are taxed,” he said. “Taxation without consultation is just not reasonable.”

Looking at alternatives, Plant said the provincial government should raise personal and corporate income taxes instead. “Clearly those who are in a position of having less will pay less than those who have high incomes,” he said.

While the elimination of MSPs was a popular political demand, Plant suggested voters might have been political naive.

“If BC residents truly thought that eliminating the MSP would have no consequence, then they were already clearly smoking something that was not supposed to be legal until later this year,” he said.

The Greater Victoria Chamber of Commerce has also attacked the tax in questioning its size, timing and impact.

Catherine Holt, chief executive officer, said that the province should align the introduction of the EHT with the elimination of MSPs to avoid “double-dipping” in 2019. She also called on the province to phase in the EHT, redefine exemption thresholds and manage health care budget better among other possible measures.

Notably, the chamber supports a “modest increase” in corporate income taxes.

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