Medical Services Premimum Task Force: Tax Reform Proposals for the Province of British Columbia

Tedds, Lindsay M. and Duff, David and Ramsay, Paul (2018): Medical Services Premimum Task Force: Tax Reform Proposals for the Province of British Columbia. Published in: BC Ministry of Finance (May 2018)

Abstract

In the September 2017 B.C. Budget Update, the government announced that MSP premiums would be eliminated within four years, with advice from a task force of experts on how best to replace the foregone MSP premium revenue. The MSP Task Force was formed in November 2017 and asked to report by March 31, 2018. The Terms of Reference1 for the Task Force required us to apply the principles of fairness, efficiency, business competitiveness, simplicity, revenue stability, and progressivity in determining the best way to replace MSP premium revenues.

On February 1, 2018 we provided the Minister with our Interim Report that described our process and what we had heard so far. We conducted a thorough review of the B.C. tax system and met with or received input from 70 individuals and 28 stakeholder groups. The most common theme in the input was that the revenue should be replaced by a combination of an increase to personal income tax and a payroll tax. Other suggestions included taxes on unhealthy activities, corporate tax changes, broadening the Provincial Sales Tax (PST) base, and changing the Home Owner Grant to an income-tested program. Our Interim Report provided the following initial advice to the Minister:

}} Eliminate premiums and start collecting the replacement revenues all at once without phase-in;

}} Provide reasonable notice to allow employees and employers to prepare for the change; and,

}} Use a combination of measures to mitigate the negative impacts of each individual measure.

In Budget 2018, delivered on February 20, 2018, the Minister announced that MSP premiums would be eliminated effective January 2020, with foregone revenue offset by the Employer Health Tax, a payroll tax. The budget document also indicated that the Task Force should continue its work and make recommendations to improve the progressivity, fairness, and competitiveness of the tax system.

We have built upon some of the ideas we were working on to raise revenue and some observations we made while reviewing the tax system, but our proposals are now generally intended to be revenue-neutral rather than ways to raise revenues.

• Item Type: MPRA Paper
• Language: English
• Keywords: MSP Premiums, tax reform
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H27 - Other Sources of Revenue; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H29 - Other

References

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