B.C. restaurateurs and retailers are pleased federal finance minister Jim Flaherty has backed down from an expected 8.6% hike in payroll taxes in 2011.
Instead, Flaherty will raise payroll taxes, which funds the employment insurance program, about 2.9% next year (See “Business owners blast Ottawa’s plans to hike payroll taxes again” – issue 1092; September 28-October 4).
The plan was to raise payroll taxes on January 1 by $0.15 for employees and $0.21 for employers for each $100 of income per employee. Flaherty slashed those hikes to $0.05 for employees and $0.07 for employers for each $100 in of income per employee.
“Here in B.C. that will cost the restaurant industry about $16 million. It would have been about a $50 million hit,” said Mark von Schellwitz, vice-president for Western Canada at the Canadian Restaurant and Foodservices Association. "We’re happy with what the finance minister did by reducing the premium hike but it is still a significant hike,” he told Business in Vancouver September 30.
Mark Startup, CEO of Shelfspace: The Association for Retail Entrepreneurs agreed.
He then compared the tax cutting to what he hopes will be an accurate rumour regarding the provincial HST.
“The change on the payroll taxes is like coming out with an HST at 12% and then cutting it back to 11%,” Startup said. “I heard that rumour today. It will be interesting to see if it turns out to be true.”
BIV asked B.C. finance minister Colin Hansen several months ago whether he would consider reducing the HST as a way to make it more palatable. He rejected the strategy out of hand, asking, “Where would we make up the revenue?”