New “Employer Health Tax” in British Columbia
British Columbia’s government recently announced that the revenues from Medical Services Plan (MSP) premiums, which are to be eliminated effective January 1, 2020, will largely be replaced with an “employer health tax.” The employer health tax will be effective January 1, 2019.
The proposed rate structure for the new tax is as follows:
| Size of Annual BC Payroll | Annual Tax ($) | Tax Rate as % of Payroll |
|---|---|---|
| Under $500,000 or less | $0 | 0% |
| $750,000 | $7,313 | 0.98% |
| $1,000,000 | $14,625 | 1.46% |
| $1,250,000 | $21,938 | 1.76% |
| $1,500,000 | $29,250 | 1.95% |
| Over $1,500,000 | $29,250 + 1.95% of payroll over $1.5 million | 1.95% |
The government estimates that the new tax will raise $1.9 billion in revenue per year in 2019-20 and 2020-21, in comparison to the $2.6 billion raised by MSP premiums in 2016-17.
Rules regarding the frequency of installment payments and how payroll amounts are to be aggregated among associated businesses are to be included in the tax legislation.
The tax will represent a new expense for companies with payrolls over $500,000 that did not pay MSP premiums for their employees.