Preamble: Manitoba’s Payroll Tax is paid by employers with a permanent establishment in Manitoba.  Payrolls of between $1.25 Million and $2.5 Million pay 4.3% on the amount in excess of $1 Million and payrolls over $2.5 Million pay 2.15% of the total payroll (the first $1 Million is not a deduction).

Manitoba continues to have one of the highest employer payroll rates in the country and is the only Western province to maintain this tax.

Resolution: That the Government of Manitoba commit to a series of annual reductions in the payroll tax, through a variety of increases in the exemption level and decreases in the rates, with the ultimate goal of eliminating this tax by 2013.

 

Resolution Report:  

The Manitoba Chambers of Commerce produces Resolution reports as part of its commitment to be accountable to its members. The reports are updated as matters unfold and have three components:

MCC Advocacy: Specific activities the MCC has done to help make this Resolution a reality. 

Developments:  Events (e.g. government action, media coverage) that relate to Resolution. 

Current Status: The MCC’s current plans to help make this Resolution a reality. 

Advice, comments, and information sharing are welcome; simply enter a reply at the bottom of this post.

 

MCC Advocacy: 

April 16, May 6 and May 7, 2009: The 2009-2010 Resolutions were posted on the MCC website, listed as part of a comprehensive Report on AGM 2009 and then notice of this story was circulated through the MCC e-Omnibus which is sent to all MCC members, Media and Government.

May 19, 2009: Resolution books were sent to every MLA and every Member of Parliament that hails from Manitoba. The following had this Resolution specifically drawn to their attention with a detailed letter setting out the background to this issue, Government initiatives (where applicable), and an argument for the Resolution:

• The Premier
• The Minister of Finance 
• The Minister of Competitiveness, Training and Trade 

August 12, 2009: This Resolution was highlighted in an MCC E-Update which was sent to 2,500 individuals including MCC members, Media and Government. 

March 9, 2010: The MCC highlighted this issue during its Pre-Budget submission. Click here to learn more. 

March 23, 2010: The MCC highlighted this issue during its Budget Day interviews with the media and in its own website coverage of the Budget. Click here to learn more.  

April 7, 2010: The MCC highlighted this issue when it met with the Finance Critic of the Official Opposition.  

April 13, 2010: The MCC highlighted this issue with a question to Manitoba Liberal Leader Jon Gerarrd. Here is a video of Dr. Gerarrd’s response to the question:

 

April 17, 2010: The MCC highlighted the drag the Payroll Tax is on employment and good wages at a Food Bank Panel discussion. Click here to learn more.

 

Developments:

August 7, 2009: The Manitoba Chambers of Commerce received a letter from Manitoba’s Minister of Finance. Here are the portions of the correspondence letter that directly touch on this Resolution:

With respect to payroll tax, I would emphasize that it is important to consider our Government’s record of reducing business taxes as a whole. Numerous measures taken since 1999 will save Manitoba businesses more than $400 million annually as of 2011. 

Most notably, we are completely eliminating two of the key business taxes: both the small business income tax and the general corporation capital tax will be eliminated by the end of 2010. The capital tax has already been eliminated for manufacturing firms. 

The general Corporation Income Tax rate dropped to 12% on July 1 – down from 17% in 1999 – and we have significantly enhanced tax credits for businesses. To mention only the largest changes, the Manufacturing Investment Tax Credit was made 70% refundable and the Research and Development Tax Credit rate was increased from 15% to 20%. We also increased the thresholds for the Health and Education Levy by 25%.

To see how significant these changes are, note that corporate profits in Manitoba increased by 86%, or approximately $2 billion, between 1999 and 2007 while net corporation income tax revenues only rose by $93 million over the same period – or less than 5% of the profit increase. Almost all of the $2 billion increase in profits was retained in the hands of Manitoba business, and this does not even include the savings on capital tax and Health and Education Levy.

When all business taxes are considered, it is clear that Manitoba has a competitive environment for business. A 2008 international tax comparison by KPMG, “Competitive Alternatives – Special Focus on Tax”, found that Winnipeg had the 20^th lowest Total Effective Tax Rate out of 102 cities in ten countries, and the third lowest effective Corporate Income Tax Rate out of 81 North American cities. This helps to explain the strong record of private capital investment in recent years. Between 2003 and 2008, the real (inflation-adjusted) value of private investment in non-residential construction rose 65% while real investment in machinery and equipment was up 38%. In 2008, Manitoba’s 15.2% increase in private investment was the highest in Canada. 

The letter also features detailed comments from the Minister of Finance on Infrastructure; Human Capital; and Effective, Efficient, Accountable and Transparent Government.  

It can be read in its entirety here.

March 23, 2010: The Provincial Budget did not decrease the Payroll Tax, nor did it indicate any desire to do so in the future. For 2009-10, revenues from the Payroll Tax were $6M more than originally budgeted and the 2010 Budget expects to receive $19M more from the Payroll Tax than it did in 2009.   

Final Report:

This issue simply could not get traction during economic hard times. It definitely needs more work. A follow-up Resolution has been proposed for the MCC’s 2010-2011 AGM. Click here for details.