Tax advantage suffering ‘death by a thousand cuts’

Federal and provincial governments pile on tax increases while U.S. reduces levies

BC Chamber of Commerce president Val Litwin: “it can take decades to build up our tax competitiveness. We can tear it apart in a year” | Rob Kruyt/BIV files

A business tax edge that Canadians once enjoyed over their U.S. counterparts is vanishing overnight, putting Canadian companies at a distinct disadvantage, especially if they compete in the U.S.

“It can take decades to build up our tax competitiveness,” said BC Chamber of Commerce president and CEO Val Litwin. “We can tear it apart in a year.”

Both the federal and provincial governments have been piling on new taxes and tax hikes. The biggest impact will be felt in the new year, when a new provincial employer health tax goes into effect.

For one year, businesses that currently cover their employees’ Medical Services Plan (MSP) premiums will pay both the new employer health tax and MSP premiums, before the MSP premiums are eliminated entirely in 2020.

As the official opposition, the BC Liberals have been flooded with calls and emails from B.C. businesses enumerating all the additional taxes they face.

“Businesses are up in arms and really concerned about the increase in load and the rapid pace that these new taxes are coming on,” said Greg Kyllo, BC Liberal MLA for Shuswap. “It’s a death by a thousand cuts.”

Provincially, the BC NDP government increased corporate taxes by 1%, hiked the income tax rate for higher-income earners by 2% and also hiked carbon taxes 16%. Businesses are also having to cope with new minimum wage requirements and increasing WorkSafeBC premiums, Kyllo said.

The biggest pinch that businesses will feel is from the double-dipping that will come into effect in 2019, when the new employer health tax comes into effect. For Ocean Trailer in Delta, the new payroll tax represents an annual increase of $55,000 over what it currently pays in MSP premiums for its employees.

But in 2019, the company will pay $325,000 for both the new health tax and MSP premiums – an additional $190,000 in one year.

“So a $135,000 MSP premium is going to cost me, in 2019, $325,000,” said Ocean Trailer president Sid Keay.

Businesses aren’t the only employers affected by the new employer health tax. So are public employers like municipal governments and health and school districts.

Businesses fear that public-sector employers will cover their increased costs by raising municipal taxes.