When you are in a hole, stop digging. It’s old advice, but often seems to escape politicians and bureaucrats. B.C. Finance Minister Carole James stirred up a hornet’s nest with her plans for a payroll tax to replace the Medical Services Plan premiums that her government promised to abolish. James has prodded the nest again with more details of the tax.
This week, the ministry released rules on what will be considered “payroll” when the tax takes effect in January. The list includes the obvious things such as salaries and wages, but it also rolls in bonuses and commissions, vacation payments, and gratuities or tips paid through an employer. And it includes employer contributions to an employee’s registered retirement savings plan.
For those already irritated by the new tax, that last one is another unnecessary poke in the ribs. Aren’t we supposed to encourage RRSP savings to ensure workers have reliable incomes in their later years?
How does slapping an additional tax on employer contributions help? And why is it even necessary to include it in calculating the new tax?
Under the plan, employers with a B.C. payroll of more than $1.5 million will pay 1.95 per cent of their total payroll, while businesses with a payroll of between $500,000 and $1.5 million will pay 2.95 per cent.
Employers whose payroll is $500,000 or less — about 85 per cent — won’t pay the employer health tax.
It’s an unwelcome hit for businesses, and potentially for employees and customers. Adding RRSP contributions to the mix makes as much sense as taxing the tips you put on your credit card but not those you leave on the table in cash.
