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Government wants to hike EI premiums


April 29, 2010
By Canadian Pizza

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April 29, 2010, Toronto – The federal government is budgeting for EI employer increases that will cost the restaurant and foodservices industry nearly $30 million each year, reports the Canadian Restaurant and Foodservices Association (CRFA).

The government has proposed an increase of $0.21 per $100 of payroll for the next four to five years.

Due to its labour-intensive nature, the foodservice industry is disproportionately burdened by increases in payroll costs such as EI premiums.  The industry is already buckling under the weight of significant cost hikes due to multiple, hefty increases in minimum wage in all but one province over the last three years.  Adding new taxes to payroll costs further impedes the industry’s ability to create or even maintain jobs.

What is extremely frustrating for restaurant operators is that government is now denying that employment insurance is a tax, although successive governments have used its revenue for unrelated purposes for well over a decade.  In reality, EI is the worst form of tax because it is profit-insensitive, regressive and job-killing.

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From 1994 to 2008, EI premiums were diverted for purposes unrelated to employment insurance, resulting in a $57-billion overcontribution by employers and working Canadians.  These overcontributions were recorded in an EI fund.

CRFA has been pressing government to absorb the cost of the employment insurance freeze in 2009 and 2010 – when EI costs rose dramatically – by using consolidated revenue.  CRFA proposed keeping increases beyond the freeze manageable by drawing down the $57 billion of overcontributions.

However, government is quietly eliminating the $57-billion fund and replacing it with a new EI operating account.  This new account will have a $13 to $15-billion deficit by the end of 2010, resulting in maximum EI premium increases in the coming years.  This change, retroactive to Jan. 1, 2009, was included in this year's Budget Implementation Act.

In response, CRFA is lobbying government to contribute to the new EI account and add a $2,000 yearly basic exemption to the EI system to alleviate the tax burden on low-income Canadians and labour-intensive businesses.