Preamble: Manitoba’s Payroll Tax is paid by employers with a permanent establishment in Manitoba.  

The Manitoba Payroll Tax is a tax imposed based on remuneration that is paid to employees 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). 

The Government did move on this tax in the 2007 Budget, increasing the exemption from $1 million to $1.25 million and raising the second threshold from $2 million to $2.5 million. Prior to the 2007 Budget, the Payroll Tax had not been reduced for nine years. It has not been reduced since the 2007 Budget. 

Manitoba’s minimum wage has risen every year since 2001. In fact, it increased twice in 2009 (by 25 cents on May 1 and by another 25 cents on October 1). It will increase by 50 cents on October 1, 2010 to $9.50 an hour. Undoubtedly, further increases to Manitoba’s Minimum Wage will be under review.

Resolution: That the Government of Manitoba publicly commit to developing a plan to eliminate the Payroll Tax and, as a first step,  increase the threshold of the Payroll Tax to $2 million for the base threshold and to $3.5 million for the second threshold.

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 two components:

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

Developments:  All other information (e.g. government action, media coverage, reports) that relates to Resolution. 

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

MCC Advocacy: 

May 11, 2010: The 2010-2011 Resolutions were posted on the MCC website, listed as part of a comprehensive Report on AGM 2010 and then notice of this story was circulated through the MCC E-Update is sent to all MCC members, Media and Government.

June 16, 2010: 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 Entrepreneurship, Training and Trade  

Developments:

July 14, 2010: The Minster of Entrepreneurship, Training and Trade wrote to the MCC on this issue as follows:

To put the Minister’s response into its proper (some might say ‘depressing’) context, here is an excerpt from the MCC’s letter to him (emphasis added):     

In our Pre-Budget submission we acknowledged the extensive business tax relief that has occurred. However, we also pointed out that the Government of Manitoba’s current vision for tax relief ends in 2011. As you move forward to think about further tax reform, you need to think about reducing and ultimately eliminating this tax on jobs. 

We cannot stress enough the insidious nature of this tax and its impact on our business environment. We recently spoke to a Manitoba company that had divided its operations into three so as not to trigger this tax – imagine the ‘needless’ administration involved in such a move. As well, they were approached by an out-of-province company about a possible merger but the company refused when they learned of the Payroll Tax.   

The Minister’s response:

“With regard to the resolution on Payroll Tax Reform, I would like to thank the Manitoba Chambers for the acknowledgement of the extensive tax relief that has occurred and would encourage the Chamber to consider our government’s record of reducing business taxes as a whole. Numerous measures taken since 1999 will save Manitoba business more than $400 million annually as of 2011. A list of some of these measures implemented includes: 

• The general Corporation Tax will be eliminated by the end of this year;
• Our 10% Manufacturing Investment Tax Credit has been expanded to include capital investment in new and used buildings, machinery and equipment, and made 70% refundable;
• Our Research and Development Tax Credit has been raised from 15% to 20% and is being made 25% refundable where the R&D is conducted under contract with a prescribed research institution in Manitoba starting in 2010;
• The general Corporation Income Tax Rate has been reduced from 17% to 12%;
• The small business tax rate has been reduced from 8% to 1% and falls to zero by the end of this year;
• The exemption level for the Health and Post-Secondary Tax (the payroll tax) was raised from $1.0 million to $1.25 million and the threshold below which employers pay the tax at a reduced rate increased from $2.0 million to $2.5 million. Only about 5% of employers pay this tax. 
• The Co-op Education and Apprenticeship Tax Credits have been progressively expanded to assist with training costs for employers of students and graduates of co-op education programs, apprentices and newly certified journeypersons;
•  Where a company is in need of greater access to credit, Manitoba has tripled the amount available under its Industrial Opportunities loan program and under its Small Business Venture Capital Tax Credit equity program; and
• The Tuition Fee Income Tax Rebate has been introduced to help Manitoba businesses to attract and retain skilled graduates by rebating up to $25,000 of tuition costs, regardless of where the graduate studied.

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. This illustrates the extent to which our tax reductions have left capital in the hands of Manitoba businesses.

Of the 22 North American Midwestern cities studied in the 2010 KPMG Competitive Alternatives Study, Winnipeg is the least expressive city in which to conduct business.

When all business taxes are considered, it is clear that Manitoba continues to have a competitive environment for business.”

September 3, 2010:  The Honourable Rosann Wowchuk, Minister of Finance, recently responded in relation to this issue. That response is available here.