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Payroll, speculation tax top municipal agenda for B.C.

The financial squeeze caused by doubling Medical Services Plan payroll costs next year is the top priority for local government leaders as they prepare for their annual meetings with B.C. cabinet ministers.

Imposition of the NDP government’s “employer health tax” for 2019, while municipalities and other employers are still carrying employee MSP premiums at a reduced rate for that year, are pushing up property taxes.

The Union of B.C. Municipalities convention in September will lead off with a resolution from Lower Mainland mayors and councillors, calling for the province to make the transition from MSP premiums to a payroll tax “cost neutral” for municipalities.

The resolution notes that municipalities with payrolls of more than $1.5 million will pay the highest rate of payroll tax, 1.95 per cent, effectively doubling their payroll costs for next year. It calls for “selected tax breaks” given to private sector organizations to be extended to cities and towns.

B.C. Finance Minister Carole James retreated on the payroll tax in July, announcing that school districts, health authorities and universities will still pay the tax, but their budgets from the province will be increased to cover the bump in costs until MSP premiums are phased out entirely in 2020.

RELATED: Non-profits, schools get break on health tax

But municipalities don’t get the break because they can raise revenues from their property tax break. Local politicians are gathering in Whistler for the UBCM convention Sept. 10-14, as most campaign for re-election to four-year terms in province-wide elections on Oct. 20.

Payrolls up to $500,000 are exempt from the health tax, and as part of her July remake, James also tripled the exemption for non-profit organizations to $1.5 million, letting almost all charitable organizations escape the tax.

For the NDP government, the health tax and a “speculation tax” on property value of second homes have been an ongoing battle since James introduced her first budget in February.

A resolution from Oak Bay calls for the province to let municipalities administer extra property taxes, and spend the money on “non-market housing” to help lower-income buyers and renters. Oak Bay is one of the B.C. communities where Albertans and Americans have sold vacation homes rather than pay tax.

RELATED: West Kelowna loses big development due to tax

The speculation tax was scaled back in March to exempt rural recreation properties.

The Gulf Islands, the Juan de Fuca region in Premier John Horgan’s constituency, Parksville and Qualicum Beach are being exempted. The municipalities of Nanaimo, Lantzville, Abbotsford, Chilliwack and Mission will still be included, as are the cities of Kelowna and West Kelowna, when the tax takes effect in 2019.

B.C. residents pay a lower rate rate for second homes in urban areas than owners from out of province or outside Canada. The tax takes effect on 2018 property value and stays at 0.5 per cent for B.C. residents with second homes. Residences that are rented out six months or more of the year will also be exempt from the tax, which was patterned after Vancouver’s “empty home tax” to discourage real estate speculators from pushing up prices.

Tom Fletcher

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