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British Columbians will no longer pay Medical Services Plan premiums as of Jan. 1, as that tax burden shifts to employers, Premier John Horgan said Dec. 5.
The elimination of premiums means a net tax cut of $800 million, the government said. Individuals will save up to $900 per year, while families will see up to $1,800 per year staying in their wallets.
The other side of the coin, however, is an increased cost to employers for labour, which could be passed on to employees or consumers, said Business Council of B.C. (BCBC) chief policy officer Jock Finlayson.
The new Employers Health Tax (EHT) kicked in at the start of 2019, while MSP premiums continued to be collected from both individuals and companies providing health benefits to employees.
Those premiums, however, were cut by 50% this year, dropping government revenue from that source from $2.6 billion in 2018 to $1.2 billion in 2019, Health Minister Adrian Dix said.
The government said provincial administrative savings from eliminating premiums would amount to more than $50 million annually.
Horgan said the reason the lowered premiums were kept while the EHT was collected was to allow for a transition between the two.
The cutting of the premium rate while instituting the tax, he said, was to give companies funds for administrative changes through the halved premiums savings.
“There’s no question there was a transition,” James said, calling the 50% cut a saving for employers.
Joyce Yan and her 18-month-old baby joined the premier at the news conference. She said the shift means the NDP government has kept an election promise.
“This allows us to put money toward our future,” she said.
Her mother, Ytrin Dai, said the change would put more money in her pocket as a retiree.
The BCBC in August identified the EHT as the second biggest tax increase of the year under the NDP government. The council said the tax could have an impact on businesses of up to $1 billion.
Finlayson said not all people were covered under the old system – including some employees, students and retirees who paid their own premiums. He said those people accounted for about half of premiums collected.
Now, he explained, businesses with payroll costs above $500,000 a year will be taxed 1.95% on those costs.
“It means that most employers are paying more than they used to,” Finlayson said. “For those that didn’t pay in the past, they’re now picking up all the costs.”
One result, he said, could be a shift toward lower wage increases or lower profit margins.
“Undoubtedly, some of it will be passed forward to the consumer,” he said. “This is an increased cost pressure that could flow through to the consumer.”
Horgan called the those targeted by the tax “a small sliver of the business community.”
“I think that’s fair and I think that’s equitable,” he said.
The government reminds those who have automated MSP payments through their financial institutions to ensure those transfers are cancelled.