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| Changes to the MSP Program in British Columbian, replacing it with a new Employers Health Tax could have a significant impact on future City of Prince Rupert budget planning (photo from Government of British Columbia) |
With the City of Prince Rupert already expressing its frustration on taxation issues related to Port Cap taxation and the Ridley Island Tax Sharing agreement with Port Edward, there is now one more irritant to add to the list for the City, with a significant cash hit ahead when it comes to Employer Health Taxes in BC.
The Provincial Government released some further background on their plans last week, issuing the tax notice related to the Employer Health Tax, part of the next steps towards the elimination of MSP premiums and the transition to the new EHT program.
The initiative introduced by Finance Minister Carole James earlier this year follows the lead of other provinces across Canada.
“While other provinces scrapped MSP premiums, the former government doubled and downloaded these unfair fees onto middle-class individuals, families, and seniors. Replacing MSP premiums with the EHT follows the lead of other provinces, and is a much fairer and progressive approach.”
Included in the Tax Notice of last week are the guidelines related to implementation information on effective rates, calculation and scheduling, remuneration, payroll definition, rules regarding instalment payments, locational and threshold rules for non-profits, and other technical implementation details.
The Finance Ministry notes that the elimination of MSP premiums and introduction of the EHT will result in a net tax decrease for British Columbians estimated to be near 800 million dollars per year, it's anticipated that families will save as much as $1,800 per year, while individuals could save up to $900 per year.
The new approach to health care is part of the BC Government program which reduced MSP premiums by 50% on January 1st of this year and will see those premiums fully eliminated by January 1st of 2020.
The shift to the EHT however will mean increased costs for a number of public sector employers, as well as municipal and regional governments.
As part of the roll out for the new health tax, the province delivered some good news for a few public service sectors in the Northwest and across BC, with School Districts, Health Authorities and Colleges set to receive provincial funding that will help ease the transition to the new payment process.
The transition to the EHT includes funding that ensures public services will not be impacted. This includes funding for colleges and teaching universities, research universities, community-health and social-service providers, school districts and health authorities.
However, there so far is no such mechanism in place for municipalities and on that note the Union of British Columbia Municipalities has put together a report to highlight the impact that the extra cost is going to have on communities in British Columbia.
From their findings, the UBCM report notes the increases ahead for the City.
Prince Rupert
2018 cost -- $107,000.00
2019 estimate -- 394,000.00
2020 estimate -- $293,000
The Reports findings note that the options are somewhat limited that municipalities have to deal with such significant jump for health care payments for municipalities.
Local governments that have a MSP related cost increase due to the EHT will need to consider how best to fund the change. As indicated in Figure 4, these Councils and Boards will face a choice of reducing services, increasing property taxation, or a mixture of both. The majority of respondents have indicated that these options involve some form of property tax increase, with 15% indicating that such increases are likely in the range of 1-2%.
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| Chart of government funding options for municipal and regional governments (from UBCM) |
The conclusion to the UBCM report, lays out the impact ahead for municipal and regional governments and what those government bodies can expect to see over the next two years.
The introduction of the employer health tax will lead to increased Medical Services Plan related costs for a considerable portion of the local government sector. While a small portion of local governments will see reduced MSP related costs once the EHT is implemented, the savings for most of these communities are negligible. Conversely, the cost impacts for some larger communities are considerable.
Based on the survey information provided to UBCM, Medical Services Plan related costs for respondents would double between 2017 and 2020. On a one-time basis, due to implementation of the EHT while MSP premiums are still in place, MSP related costs for respondents would quadruple between 2018 and 2019.
Given that the communities most impacted tend to be larger population centres, it is safe to conclude that the implementation of the EHT will lead to property tax increases for the majority of British Columbia’s population. This will have a particular impact on the private sector, since businesses that are already paying the EHT directly will likely face increased property taxes as well.
For the UBCM, the new tax policy has seemingly left its membership with one over riding observation on the provincial government's plans.
Due to the extent of these impacts, many local governments are questioning a tax policy that results in the funding of a provincial service (healthcare) through property taxation.
Prince Rupert City Council has to this point not outlined how they plan to approach the increases through the years ahead, with the topic one which has not been included in the discussion from their public council sessions of the last year
You can review the update as well as some background on the EHT from the province here.
The full report from the UBCM providing for the cost analysis of the impact on municipalities can be found here.
Discussion points from the City of Prince Rupert can be reviewed from our Council archive page here.
For more items of note from Victoria see our Legislature archive page here.
A wider overview of provincial issues can be found on our D'Arcy McGee portal.
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