What is the Employer Health Tax Act?

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The Employer Health Tax Act is legislation passed by the government of the Canadian province of Ontario in 1990. Employers have to pay an amount of health tax to the provincial government, based on the total amount of remuneration that employers pay to their employees during the tax year. The tax is paid to the Ontario revenue department and is used to fund the Ontario health insurance plan.

Remuneration

Employers pay employer health tax on the total remuneration paid to employees working at permanent establishments located in Ontario. The act defines what is meant by remuneration for the purposes of calculating the tax. Salaries and wages paid to current employees are included in an employer's remuneration figures, and remuneration paid to former employees as a result of their previous employment with an employer must be included in an employer's remuneration figures. A former employee may receive ongoing payments from an employer due to a condition of a termination of employment agreement with an employer, or continuing commission on sales from an account with a customer established by the former employee. If an employer pays an employee to provide a service for a third party, this still forms part of that employer's remuneration figures.

Tax Rates

The employer health tax is a progressive tax, meaning that the higher the total remuneration paid by an employer, the higher the tax rate becomes. The act applies a number of bands, with each band representing a different rate of tax. As of 2011, employers with a total remuneration of less than $200,000 pay employer health tax at a rate of 0.9 percent. A rate of 1.101 percent applies to remuneration above $200,000, up to and including $230,000. Successive bands of remuneration attract greater amounts of tax, with the top rate of 1.95 percent being applied to remuneration payments above $400,000.

Audits

The minister of revenue, responsible for the administration of the act, may appoint auditors to examine the records of employers. Auditors have the power to enter an employer's premises without having to obtain a court order or legal warrant. Auditors do not have to give notice of their intention to visit an employer's premises. The auditors have the right to examine the employer's books and records without obstruction, and to question anyone on the premises during the course of an audit examination. Auditors may test computer systems to ensure that they provide accurate information, wherever computers are used to provide information used on an employer health tax return. You commit an offense if you obstruct an auditor, or hide accounts, books and records from an auditor.

Offenses and Penalties

If you fail to provide a return to the ministry of revenue, or if you provide an incomplete return, you may be committing an offense according to the act. If you are found guilty of committing an offense, you may be subject to a penalty imposed by the ministry of finance and punishment imposed by the courts. If you fail to submit a return, the ministry may impose a penalty equal to 5 percent of the total tax that you have to pay. If you attempt to evade paying the tax by making false statements, falsifying or destroying documents and records, you may receive punishment that can include a fine of not less than $500 or 25 percent of the tax you should have paid, whichever is the greater, or imprisonment of up to two years. The courts can impose a punishment including both a fine and imprisonment.

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