The Newfoundland and Lab-rador Employers’ Council plans to ask the provincial government today to eliminate the health and post-secondary education payroll tax.
It’s not a new request, but this time the council says it has more evidence to back its plea, showing that its members would put the money they’d save to good use.
Executive director Richard Alexander says the council recently surveyed its members to find out what they would do with the money if the tax was eliminated.
“Fifty per cent of them said they would use the increased revenues from elimination of the tax to increase employment levels in their organizations and 40 per cent said they would increase salaries of existing employees if the tax were eliminated,” Alexander said Thursday.
This morning he was scheduled to make a presentation to the province’s pre-budget consultations in St. John’s, asking the provincial government to do away with the payroll tax altogether in its 2011 budget.
The payroll tax was implemented by the province in 1990. In January, 2008, the province agreed to increase the threshold for the two per cent payroll tax to $1 million from the previous $600,000.
The employers’ council, in its recent survey, also asked members what they did with the money they saved from this change three years ago.
“The single biggest response that we received from members who were affected by the raising of the threshold was that 40 per cent of them said they increased salaries in their organizations,” Alexander said.
About 300 council members responded to the survey, but Alexander said some of those individual member companies are employers with 30 or more businesses all throughout the province.
“They employ greater than 50 per cent of all employees in the province,” Alexander said, “and I would suggest the vast majority pay the payroll tax.”
The employers’ council has contended for many years that when government taxes payrolls directly, it adversely impacts employment levels and salaries.
Alexander said federal government research and comments have supported that view, but the local findings from the provincial council’s survey presented an even stronger case than it originally expected.
One of the arguments against removing the payroll tax has been that the revenue would have to come from somewhere else, Alexander said, “but what the research at the national level shows and what our preliminary findings are suggesting is that’s not the case.”
The employers’ council argues that eliminating the payroll tax would increase revenues to the provincial government from personal income taxes because more people would be employed by local companies and many workers could receive higher wages. “They’re going to go out and spend more,” Alexander said, so government will collect more through personal income taxes, the harmonized sales tax (HST) and through corporate taxes arising from business expansions.
“We’re hoping the minister is going to look hard at this tax in this provincial budget,” Alexander said. “There’s a reason that every other province in Atlantic Canada has chosen not to tax payroll and that’s because it’s a counterproductive tax. It inhibits salaries, salary increases and it inhibits employment growth.”
Alexander said the payroll tax also impacts community services.
The employers council has been holding “tax on labour focus groups” around the province and Alexander said a community group in Labrador told the council it pays close to $30,000 in payroll tax, which if eliminated could be used for much needed community services.
“We’ve also heard from home-care agencies,” Alexander said. We have one home-care agency that’s below the threshold that doesn’t pay the tax and another one that’s over the threshold that does pay the tax.”
He said the agency that has to pay the payroll tax receives the same funding per client as the one that’s not taxed, which means it has to struggle to compete with the other agency.
“That’s the challenge with payroll tax,” Alexander said. “It taxes your total payroll and not your profit, so it makes no assumptions about the profitability of the business and sometimes the more people you employ doesn’t necessarily mean the more profit you get.”