The simple fact is: Manitoba’s small businesses are facing a greater cost crunch than they did three years ago. Taxes are increasing and other costs are rising from every level of government, and the problem is expected to get worse with annual hikes coming to both Canada Pension Plan (CPP) premiums and carbon taxes.
While, Government of Manitoba increased the small business corporate income tax threshold to $500,000 to begin 2019, and lowered the Provincial Sales Tax (PST) to 7 per cent on July 1st, 2019, more tax relief is needed now to ensure the province’s tax competitiveness doesn’t erode further.
Personal Income Taxes:
Small businesses owners like you understand that high personal income taxes negatively impact their employees and their customers. In Manitoba, the Basic Personal Exemption (BPE) amount is now indexed to inflation, but remains the lowest west of Prince Edward Island. In 2019, Manitoba was $2,420 lower than the national average and $6,439 lower than neighbouring Saskatchewan.
Raising the basic personal amount will put more money back in residents’ pockets to spend in their local communities.
CFIB challenged Manitoba parties to increase the Basic Personal Exemption amount to the national average ($12,026 in 2019) before 2021, while keeping income tax brackets indexed going forward.
Education Property Taxes:
Education spending in Manitoba has dramatically outpaced inflation growth over the last ten years. New CFIB research shows that from 2009 to 2018, expenses per pupil grew by 28.2 per cent, while inflation grew by just 17.3 per cent. School property taxes have increased over this time to make up for the growing costs. To make matters worse, business owners (51.3%) and farmers (8.4%) pay a disproportionate share of these school property taxes.
In fact, when comparing the school property tax gaps between commercial and residential properties in Winnipeg, both valued at $300,000, commercial properties are paying 3.9 times what residential properties do! As a result, a $300,000 property costs a Winnipeg business $4,667 each year for school property taxes, while a resident pays just $1,206.
CFIB challenged Manitoba parties to:
- Create a new property assessment class for small businesses and lower the portion rate;
- Eliminate the “special levies” from commercial properties to increase education funding fairness;
- Work with school boards to find efficiencies and savings in order to spend sustainably going forward;
- Eliminate the $5,000 cap on the Farmland School Tax Rebate program; and
- Implement a longer-term plan to adjust education property tax portioning to lower the Education Support Levy (ESL) for businesses and farmland. Business and farms combined should pay no more than a 1:1 education property tax ratio with residents.
Research shows that payroll taxes are the most punitive taxes for small businesses. They are profit insensitive, punish growth, and affect smaller businesses more as they are labour-intensive. Simply put, we need to lessen the payroll tax burden we place on small businesses if we want our economy to grow to its potential.
However, for businesses in Manitoba, the federal and provincial property tax burden is bad and growing. Federal payroll taxes are increasing, led by seven straight years of CPP premium increases. Provincially, the Health and Post Secondary Education Tax Levy (the Manitoba Payroll Tax) is high and increasing each year.
According to a national report from CFIB, Manitoba’s businesses have the fourth highest payroll tax burden in the country, ranking just behind British Columbia and Ontario.
The Manitoba Payroll Tax’s exemption levels are not indexed to inflation and have not risen since 2008. For example, the lower exemption threshold is $1.25 million, but would have been $1.47 million in 2019 had it been indexed to inflation over the period. At a lower exemption threshold of $1.5 million, Manitoba would rank below the national average in terms of its overall payroll tax burden.
CFIB challenged Manitoba parties to:
- Raise Manitoba’s Health and Post Secondary Education Tax Levy exemption to $2,500,000 and index the exemption to inflation; and
- Implement a longer-term plan to phase out the Health and Post Secondary Education Tax Levy.
Other Tax Relief:
Provincial Sales Tax (PST):
- Expand the PST exemption base with an emphasis on reducing energy costs (e.g. Manitoba Hydro bills for businesses, new window installations and other home retrofit projects, insurances, sports equipment, etc.).
- Follow the leads of New Brunswick and Ontario by keeping access to the Manitoba small business tax rate open for businesses affected by the few federal tax rules on passive investments;
- Work with other provincial governments to freeze further expansion of the Canada Pension Plan premiums; and
- Say “no” to the federal carbon tax, and focus instead on better methods to reduce emissions including empowering entrepreneurs to reduce emissions with better information, technology and tax relief.
No New Taxation:
- Do not introduce a provincial carbon tax, a new health-care premium, or provide new taxation powers to municipalities, etc.
To find where the Government of Manitoba stands on small business priorities, visit CFIB’s Party Leaders’ Survey on Small Business Priorities.
Do you have stories to share about how increasing provincial taxes have negatively impacted your business? Call CFIB today at 1-888-234-2232 or send an email to [email protected].