'The money's got to come from somewhere': Small business owners fear impact of tax replacing MSP

Saying goodbye to Medical Services Plan premiums will come as a relief to some, but B.C. business owners say consumers and employees will feel the pinch from the new Employer Health Tax.

The tax replaced MSP payments, which were usually paid by individuals. It now puts the onus of paying for health care on the workplace.

MSP premiums were eliminated Jan. 1. The Employer Health Tax affects businesses with payrolls greater than half a million dollars.

But some small-business owners say the tax will do more harm than good. 

"I think it's going to restrict pay increases. It's going to restrict hiring," said Amy Robinson, executive director for LOCO B.C., a not-for-profit group that represents local businesses. 

Businesses may have less ability to hire new staff and contribute to charity, she told CBC's The Early Edition. 

Consumers will also feel the impact, she added. 

"I don't know what else businesses could do other than raise prices," she said.

Robinson said she has spoken to one business owner who is just below the threshold for having to pay the tax. If that owner were to give her employees a small raise or hire another employee, her payroll would exceed the threshold and the tax would cost her an additional $14,000 a year. 

Businesses with larger payrolls will pay more as well. Some local manufacturers will pay $30,000 a year on the tax, she said, making it difficult for them to compete with multi-national companies. 

More consultation should have been done before implementing the tax, Robinson said. 

'Margins are thin as it is'

In an emailed statement, the Ministry of Finance said B.C. was the last province to have health-care premiums and has moved to a model "consistent with other provinces."

B.C.'s EHT rate is the lowest in Canada among provinces with a payroll tax, it said. 

According to the government, the elimination of MSP will save individuals up to $900 a year and families up to $1,800 a year.

Because businesses with payrolls under $500,000 are exempt, more than 85 per cent of B.C. businesses will not have to pay the tax, it said. 

"Employers had a year's notice to plan and budget for the EHT, and organizations can use the savings from the 50 per cent cut to MSP premiums in 2018 and 2019 to help offset EHT costs," the statement said. 

Louise Schwarz is the co-owner of Recycling Alternative, a waste management company in Vancouver. 

She expects the tax will cost her business an extra $45,000 a year. 

"For a small, medium-sized business, margins are thin as it is. And then to add that now to what we're looking at has a really big impact," she said.

Schwarz said her company is looking at how it can accommodate the tax in its operating budget and ensure employees understand how the tax affects their remuneration packages. 

"The money's got to come from somewhere. There's no more juice to squeeze from that lemon," she said.

"It's either going to come from impacting the employees and what they're earning and what their remuneration is or it's going to come from the consumer. It's certainly not going to come from the business, because a business has to remain profitable."