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British Columbia is introducing a new employer health tax as it moves to fully eliminate medical services plan premiums.

During the province’s 2018 budget announcement on Tuesday, Finance Minister Carole James said the government will eliminate premiums by Jan. 1, 2020. The government estimates the move will save people up to $900 a year and families up to $1,800 a year. 

Read: Seven benefits trends to watch in 2018

When the new employer health tax takes effect on Jan. 1, 2019, employers with a payroll of more than $1.5 million will pay a rate of 1.95 per cent on their total payroll, while businesses with a payroll between $500,000 and $1.5 million will pay a reduced tax rate. Employers with a payroll under $500,000 will be exempt from paying the tax.

The government noted it would provide further details about the employer health tax before it takes effect in 2019. It estimates the new tax will raise about $463 million in 2018/19 and expects it to provide $1.9 billion in revenue per year in 2019/20 and 2020/21.

In its 2017 budget, the B.C. government cut medical services plan premiums by 50 per cent, beginning Jan. 1, 2018, and increased the threshold for premium assistance by $2,000. 

Since all households with adjusted net income of more than $42,000 per year currently pay the same amount, eliminating the premiums will result in a fairer tax system, noted the government in a news release. British Columbia is the only province in Canada that levies medical services plan premiums, which are complex and expensive for businesses and government to administer, according to the release.

Read: Saskatchewan tax on insurance premiums ‘not good public policy’

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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