Non-profit organizations will get a break on the B.C. government’s new health care payroll tax when it takes effect next year.
Finance Minister Carole James released the details of the new tax Wednesday, so businesses, local governments and other agencies can prepare. The official notice to employers reveals a $1.5 million exemption for charities and qualifying non-profit organizations, three times the exemption offered to businesses when the tax was announced in the B.C. budget in February.
In an interview with Black Press, James clarified that while school districts, health authorities and universities will pay the tax, their budgets from the province will be adjusted to cover the additional costs in the transition period.
“We will be providing resources to school boards, to health authorities, social services, community organizations, universities and colleges,” James said. “Unlike the previous government, we’re not downloading the costs.”
Reimbursing provincial agencies for the cost of the payroll tax is estimated to cost the province $90 million a year.
The tax is to replace revenue collected from Medical Services Plan premiums, paid by individuals and employers. The rate was cut by half last year and is to be eliminated by 2020.
The tax applies to “any entity with a payroll,” says the memo to employers. That includes municipalities, which are preparing to raise property taxes to cover costs they expect to double in 2019. James said.
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As of January 2019, employers pay 1.95 per cent of their payroll for businesses and organizations with payrolls of more than $1.5 million. A lower rate applies for payrolls between $500,000 and $1.5 million, and those below $500,000 are exempt.
Non-profits that are not registered charities but get the higher exemption are defined as being operated “solely for social welfare, civic improvement, pleasure or recreation” and “any other purpose other than profit.” The higher exemption will also apply to each location of a large non-profit, allowing most to escape additional costs, James said.
The payroll tax applies whether employers pay their employees’ MSP premiums or not. James emphasized that while property taxes may go up, individuals stand to save $800 a year if they have been paying their own MSP premiums.
The finance ministry calculates that with the exemptions, 85 per cent of B.C. businesses will not pay the employer health tax, and fewer than five per cent will pay the full rate of 1.95 per cent a year. Those top five per cent will be responsible for paying 96 per cent of the tax.