Issues update: Employer’s health tax and the Elimination of MSP March 2018

Thank you for writing to me about the employer’s health tax and the elimination of MSP

Thank you for writing to me about our government’s initiative to eliminate the MSP and replace that tax, in part, with an employer’s health tax. BC is the last province in Canada to eliminate MSP-like taxes, and the tax we are introducing to replace it is the lowest rate of any similar tax across the country.

I note that the previous government more than doubled the MSP during their time in power. We are, perhaps obviously, going the other direction by eliminating the MSP.

For the coming tax year, which starts April 1, MSP will be reduced by 50%. Those businesses that pay their employees’ MSP taxes will save significantly under this initiative. When the MSP is eliminated entirely in 2020, businesses will benefit from an easier to administer system, and families who paid this regressive tax will save $1800.

Next year, when the employer health tax is introduced, no business that has a payroll under $500,000 will pay the employer’s health tax, which means that 85% of businesses don’t have to pay the new tax that will replace the MSP at all. A graduated rate is in place for those businesses between $500,000 and $1.5m, and above $1.5m in payroll.

Our government is supporting small business by cutting the small business tax rate from 2.5% to 2%, and by eliminating the PST on electricity for businesses. Ministry of Finance staff will be working closely with affected employers to ensure that the transition is as smooth as possible.

Yours truly,

David Eby