Manitoba, Quebec among jurisdictions proposing payroll-related measures
No news is sometimes good news. For payroll professionals, that is certainly true when it comes to provincial/territorial annual budgets.
So far, only a few jurisdictions have announced payroll-related changes in their budgets and the proposed measures do not involve major adjustments affecting source deductions.
Here is a look at some payroll-related announcements in budgets released up to the end of March:
The Manitoba budget, which Finance Minister Scott Fielding tabled on March 7, proposes to lower the rate of the province’s retail sales tax (RST) from eight per cent to seven on July 1.
The RST applies to some taxable benefits that employers provide to employees, including group term life insurance contracts for employees who are Manitoba residents.
The previous government raised the rate to eight per cent in 2013 and planned to keep it there for 10 years before lowering it to seven per cent.
Also announced: Beginning next year, all businesses that have to file, remit, and pay the province’s Health and Post-Secondary Education Tax Levy would have to do so electronically.
The government levies the tax on remuneration that employers with a permanent establishment in the province pay to their employees if their total annual payroll exceeds $1.25 million. For payrolls between $1.25 million and $2.5 million, the tax rate is 4.3 per cent on the amount over $1.25 million. For payrolls over $2.5 million, the rate is 2.15 per cent on total payroll.
The Quebec budget, which Finance Minister Eric Girard released on March 21, did not propose any rate changes affecting the Quebec Pension Plan (QPP), Quebec Parental Insurance Plan (QPIP), or personal income tax deductions, but it did include some payroll-related measures.
One proposal would reduce the amount of payroll taxes that small- and mid-size businesses (SMBs) pay if they employ older workers, beginning this year.
The reduction would come in the form of a refundable tax credit to foster the retention of experienced workers and would apply to Quebec payroll taxes that an SMB pays in relation to workers 60 years and older.
Payroll taxes include employer contributions to the QPP, QPIP, Health Services Fund (HSF), and the labour standards levy.
The proposal would apply to SMBs in all economic sectors that meet the main eligibility conditions for the province’s small business deduction. The rate of the refundable tax credit would vary, based on the employee’s age and the SMB’s total payroll.
An employer’s total payroll would be calculated in the same way that it is for the HSF contribution, and the same payroll thresholds that apply for determining the HSF rate would apply to the proposed refundable tax credit.
As a result, the ceiling for total payroll for eligibility for the refundable tax credit would be $6 million for 2019 and 2020, $6.5 million for 2021, and $7 million for 2022. Beginning in 2023, the ceiling would be indexed.
For SMBs with a total payroll of $1 million or less, the tax credit would be calculated at a rate of 50 per cent for workers aged 60 to 64 years, to a maximum of $1,250 per year. For employees aged 65 and older, the maximum tax credit would be calculated at 75 per cent for SMBs with a total payroll of $1 million or less, to a maximum of $1,875 per year.
Girard said the proposal was designed to encourage employers to hire older workers to help address a labour shortage due, in part, to an aging population.
To persuade older workers to remain in or re-enter the workforce, the budget also included changes to the province’s tax credit for experienced workers.
The tax credit, which employees can claim on a Source Deductions Return (TP-1015.3-V), eliminates income tax payable on part of their eligible work income that exceeds $5,000.
The budget proposes to lower the age at which individuals may claim the tax credit from 61 years to 60.
It also proposes to increase the ceiling on excess work income that is eligible for the tax credit to $10,000 for workers aged 60 to 64.
Currently, the ceiling varies from $3,000 to $9,000, depending on age between 61 and 64 years. The ceiling would remain $11,000 for older workers.
The government would also rename the tax credit to the tax credit for career extension. The tax credit proposals would apply as of the 2019 tax year.
The budget also included tax credit changes that employers in the hotel and restaurant sector may claim for reporting employee tips. The changes would add additional employer indemnities to the list of eligible expenses that employers may claim for the refundable tax credit.
In Quebec, employees working in the hotel and restaurant sector must generally report their tips to their employer every pay period. If the amount that an employee reports is less than eight per cent of the sales upon which tips are expected, employers must allocate to the employees the difference between the amount reported and what was expected.
Employers are required to include the reported and allocated tips when calculating source deductions and employer contributions, as well as when determining statutory holiday pay, pay for the National Holiday, vacation pay, and pay for certain leaves allowed under the Act respecting labour standards.
Employers may claim the refundable tax credit for the portion of these expenses related to the tips.
The budget proposes to add to the list of eligible expenses for which employers can claim the tax credit two new days of paid leave that employees may take for family obligations or for health reasons if they have at least three months of service. The change would apply to days of paid leave that employees take beginning Jan. 1, 2019.
The Saskatchewan budget, which Finance Minister Donna Harpauer tabled on March 20, did not contain any changes to provincial personal income tax rates or tax brackets.
It also did not address if, or when, the government would go ahead with income tax rate changes first announced in 2017, but not yet implemented.
While it reduced rates in 2017, the government announced last year that it would temporarily hold off on the 2019 rate reductions, originally planned for July 1, until the province’s finances improved.
In this year’s budget, Harpauer announced that the government had eliminated the province’s deficit.
Among the only employment-related tax measures included in the budget were new, non-refundable tax credits for volunteer firefighters and volunteer emergency medical first responders, beginning in 2020.
Individuals with at least 200 hours of eligible volunteer services in a year would be able to claim a $3,000 tax credit amount.
The British Columbia budget, which Finance Minister Carole James presented on Feb. 19, did not contain any payroll-related tax rate changes, although it did reiterate the government’s intention to eliminate Medical Services Plan premiums next year.
The budget announced that the government would spend $14 million over three years to transform the province’s Employment Standards Branch, including updating employment standards legislation and ensuring that the branch applies the standards fairly and
Some of the funding will go towards implementing a Temporary Foreign Worker Protection Act and creating a registry of licensed foreign worker recruiters and employers seeking to hire.
Budgets in New Brunswick, Northwest Territories, Nova Scotia, Nunavut, and Yukon did not contain any payroll-related tax measures.
Budgets for Alberta, Newfoundland and Labrador, Ontario, and Prince Edward Island are still to come.