2008 Manitoba Budget Report
April 9, 2008
Highlights
- Summary Surplus of $329 Million Forecast for 2007-08
- Corporate Capital Tax Eliminated for Manufacturers on July 1, 2008
- Personal and Corporate Tax Reductions Confirmed
Overview
“Economic Strength for an Unpredictable Future"
On April 9, 2008, the Honourable Greg Selinger presented his ninth budget as Minister of Finance. With a continuing strong economy, the government announced some investments in key areas.
The surplus for the 2007/08 fiscal year, originally budgeted at $175 million, is now forecast to be $329 million after a budgeted $110 million transfer to the province's Debt Retirement Fund. However, this surplus did include $11 million drawn from the province's Fiscal Stabilization Fund (FSF). For the 2008-09 fiscal year, the province has budgeted for a surplus of $96 million, which includes draws from the FSF of $60 million and a $110 million payment to the Debt Retirement Fund.
The government announced new spending in education, health care and infrastructure. Although there were few tax changes of general interest, some industry-specific incentives were announced.
The following is a summary of the more important tax changes of interest to our clients.
|
Manitoba Budget Projections (in millions $)
|
|
|
Original Estimate 2007/2008
|
Revised Forecast 2007/2008
|
Projected
2008/2009
|
|
Revenue
|
9,302
|
9,592
|
9,851
|
|
Expenditures
|
(9,226)
|
(9,490)
|
(9,799)
|
|
Transfer to Debt
Retirement Fund
|
(110)
|
(110)
|
(110)
|
|
Transfer from
Fiscal Stabilization Fund
|
37
|
11
|
60
|
|
Budgetary Surplus
|
3
|
3
|
2
|
|
Consolidated
Surplus on a Summary
Basis (includes
government organizations)
|
175
|
329
|
96
|
Personal Tax Changes
Personal Tax Rate Changes
The Finance Minister confirmed that previously announced personal tax changes for 2009 will go ahead - starting January 1, 2009, the first bracket rate will be reduced from 10.9% to 10.8%; the middle bracket threshold will be increased from $30,544 to $31,000; and the top bracket threshold will be increased from $66,000 to $67,000.
The following chart summarizes the changes that have been proposed.
|
Tax Year
|
First
Bracket Rate
|
Middle Bracket Threshold
|
Middle Bracket Rate
|
Top Bracket Threshold
|
|
2007
2008
2009
2010
2011
|
10.90%
10.90%
10.80%
10.70%
10.50%
|
$30,544
30,544
31,000
32,000
35,000
|
13.00%
12.75%
12.75%
12.75%
12.75%
|
$65,000
66,000
67,000
68,000
70,000
|
|
Note: all changes
planned after 2009 are subject to balanced budget requirements.
|
Basic Personal, Spousal and Eligible Dependant Amount
Under changes in last year's budget, the Basic Personal Amount, the Spousal Amount, and the Eligible Dependant Amount were increased to $8,034 effective January 1, 2008. It was announced today that these amounts will be increased by a further $100 to $8,134, effective January 1, 2009.
Primary Caregiver Tax Credit
A new Primary Caregiver Tax Credit will be available for the 2009 taxation year for individuals who serve as volunteer primary caregivers for more than three continuous months. A primary caregiver may be a spouse, other relative, neighbour or friend who provides care without remuneration to a Manitoba Home Care client.
After a three-month qualifying period, the refundable credit is $85 per month to a maximum of $1,020 per year to the primary caregiver for each client. Additional conditions will apply.
Personal Tax Credit
In addition to the regular tax credit amounts, Manitoba also allows an additional refundable personal tax credit which is reduced by 1% of family income. The various credit components will be increased by approximately 3% in 2009 when compared with 2008.
Community Enterprise Development Tax Credit
The Community Enterprise Development Tax Credit encourages Manitobans to invest in community-based enterprise development projects by providing a non-refundable personal income tax credit of 30% on a maximum $30,000 investment in equity capital. It was announced that this credit will be extended to the end of 2011.
Manitoba Mineral Exploration Tax Credit
To parallel an extension in this year's federal budget, the Manitoba credit is extended for one year and will apply to flow-through share agreements entered into before April 1, 2009. Under the look-back rule, exploration expenditures renounced on funds raised on the issuance of flow-through shares in one year can be spent on eligible expenditures until the end of the subsequent year.
Business Tax Changes
Corporate Tax Cuts
Again this year, the government affirmed its intention to reduce corporate income tax rates. In particular, the province announced that it intends to reduce the general corporate income tax rate to 11% at a date to be determined, subject to budget balancing requirements (the reduction to 12% on July 1, 2009 was confirmed). In addition, the government confirmed that the previously announced reduction of the small business corporate income tax rate from 2% to 1% on January 1, 2009 will proceed.
To maintain integration of personal and business taxation for small business owners, the dividend tax credit rate on ineligible dividends will be reduced from 3.15% to 2.5% for 2009.
Co-op Education and Apprenticeship Tax Credits
Today's budget announced changes to the Co-operative Education Tax Credit, which has been expanded and renamed the Co-op Education and Apprenticeship Tax Credits. A new component, the Journeypersons Hiring Incentive, has been added to provide an incentive for eligible employers to hire recent graduates of apprenticeship programs. Eligible employers can earn this refundable tax credit for each of the first two twelve-month periods of permanent, full-time employment of a qualifying journeyperson who is performing work primarily in Manitoba in their certified trade. The credit will equal 5% of the wages and salaries paid up to a maximum of $2,500 per twelve months of employment for each journeyperson. The employment periods must be continuous and consecutive but each
twelve-month period may be interrupted by a seasonal layoff of not more than three months. There is no limit on the number of journeypersons an employer can hire.
Film and Video Production Tax Credit
The Minister announced enhancements to the Film and Video Production Tax Credit effective for productions beginning principal photography after 2007, which include:
- A new 5% Manitoba Producer bonus on eligible salaries where a Manitoba resident receives credit as a Producer on an eligible film;
- An increase in the Frequent Filming bonus for returning producers from 5% to 10%;
- An increase to the percentage of eligible salaries paid to non-residents for work performed in Manitoba that is eligible for the film tax credit from 20% to 30% of eligible salaries paid to Manitobans;
Manufacturing Investment Tax Credit
The Minister confirmed a previous announcement that the refundable portion of the Manufacturing Investment Tax Credit will be increased to 70% from 50% for qualified property acquired on or after January 1, 2008 (last year's budget increased this credit to 50% from 35%). This credit was scheduled to expire on June 30, 2009 and will now be extended to December 31, 2011.
New Interactive Digital Media Tax Credit
The Minister announced a new refundable tax credit for eligible taxable Canadian corporations with a permanent establishment in Manitoba that develop and produce interactive digital media projects in the province. The credit will be equal to 40% of remuneration paid to Manitobans on projects approved by Manitoba Science, Technology, Energy and Mines to a maximum of $500,000. This credit replaces the Manitoba New Media Production Grant which was available for projects prior to April 10, 2008.
Book Publishing Tax Credit
The Minister introduced a new refundable Book Publishing Tax Credit which will be equal to 40% of eligible Manitoba labour costs which will include non-refundable author advances and remuneration for activities carried out in Manitoba. Eligible publishers will be able to claim up to a maximum of $100,000 per year for work on qualifying books. This credit will be available on eligible labour costs incurred and paid in Manitoba by the publisher after April 9, 2008 and before 2012.
Community Enterprise Investment Tax Credit
The Community Enterprise Investment Tax Credit is a non-refundable income tax credit for resident Manitobans, both individual and corporate, who invest in qualifying equity capital in emerging enterprises. This credit will be available to taxpayers who invest a minimum of $20,000 in eligible securities acquired on or after January 1, 2008 and before 2011, with the maximum annual tax credit available of $45,000.
Currently, the maximum annual investment by an investor that qualifies for a tax credit is $150,000. The Minister announced an increase to the maximum annual investment limit by an investor to $450,000, retroactive to the commencement of the program, January 1, 2008. This will result in an increase in the maximum annual tax credit earned in a given year to $135,000 but this change does not increase the maximum amount of tax credit available to be deducted against Manitoba income tax otherwise payable in a given year, which remains at $45,000.
Corporation Capital Tax
Under current rules for corporation capital tax (CCT), a corporation is allowed to claim a $10 million deduction in calculating taxable capital. The capital tax rate for corporations with taxable paid-up capital between $10 million and $20 million is 0.2% and the rate for corporations with taxable paid-up capital over $20 million is 0.4%. There is a notch provision for total paid-up capital between $20 million and $21 million.
The Minister announced the elimination of CCT for manufacturing and processing corporations effective July 1, 2008. For other corporations subject to the general CCT, the Minister confirmed that it will be eliminated by
December 31, 2010 as committed in last year's budget.
For corporations with taxable paid-up capital over $21 million, the rate will be reduced from 0.4% to 0.3% effective January 1, 2009, to 0.2% effective January 1, 2010 and eliminated after December 31, 2010. For corporations with taxable paid-up capital between $10 million and $20 million, the rate will be reduced from 0.2% to 0.1% effective January 1, 2009 and eliminated effective January 1, 2010. The notch provision for total paid-up capital between $20 million and $21 million will also be adjusted. Corporations with fiscal years straddling the effective dates will prorate the CCT payable for the fiscal year.
Sales Tax Changes
Retail Sales Tax
Effective May 1, 2008, services to direct agents (items consumed in a manufacturing process), welding tips and nozzles, and rolls used in the pulp and paper industry will be exempted from retail sales tax. Also, effective May 1, 2008, the existing shipping supplies exemption is expanded to include non-returnable stabilizing supplies, and the exemption for prescription smoking cessation products is broadened to include non-prescription products.
Other Changes
Emissions Tax on Coal
A new tax of $10 per tonne of carbon-dioxide-equivalent emissions will apply to coal effective July 1, 2011. The tax rate will subsequently be raised to $30 per tonne on a schedule to be announced in a future budget. The province will also contribute up to 25% of private sector capital costs of investments to convert from coal, and will work with coal users to find appropriate substitutes.
Tobacco Tax
The Tobacco Tax Act will be amended to require tobacco manufacturers to have a permit for all equipment used in Manitoba to manufacture tobacco products, and to update the marking provisions.
Mutual Fund Corporations
The capital gains refund provisions under Manitoba income taxation applicable to mutual fund trusts will be made fully available to mutual fund corporations retroactive to 2006.
Riparian Tax Credit
The Riparian Tax Credit will be extended to permit another intake group running from 2009 through 2013.
Education Property Tax Credit
The basic amount of this credit is increased from $525 to $600. The majority of homeowners will have this amount subtracted from their 2008 property tax bills, with the province reimbursing school divisions and municipalities accordingly. Renters will receive the increased amount when they file their 2008 income taxes.
How Manitoba Compares
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to April 9, 2008.
|
|
Top
2008
Personal Rates
%
|
Top
Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small
Business
%
|
Retail
Sales
Tax
%
|
|
BC
|
43.70
|
31.5 (1)
|
31.5 (1)
|
15.5 (1)
|
7.0
|
|
Alta.
|
39.00
|
29.5
|
29.5
|
14.0
|
-
|
|
Sask.
|
44.00
|
32.5 (2)
|
29.5
|
15.5
|
5.0
|
|
Man.
|
46.40
|
33.5 (3)
|
33.5
|
13.0
|
7.0
|
|
Ont.
|
46.41
|
33.5
|
31.5
|
16.5
|
8.0
|
|
Qué.
|
48.22
|
30.9
|
30.9
|
19.0
|
7.5 (6)
|
|
NB
|
46.95
|
32.5
|
32.5
|
16.0
|
8.0 (7)
|
|
NS
|
48.25
|
35.5
|
35.5
|
16.0
|
8.0 (7)
|
|
PEI
|
47.37
|
35.5
|
35.5
|
14.2 (4)
|
10.0 (6)
|
|
Nfld.
|
45.50
|
33.5
|
24.5
|
16.0
|
8.0 (7)
|
|
Yukon
|
42.40
|
34.5
|
22.0
|
15.0 (5)
|
-
|
|
NWT
|
43.05
|
31.0
|
31.0
|
15.0
|
-
|
|
Nunavut
|
40.50
|
31.5
|
31.5
|
15.0
|
-
|
- (1) The general tax rate will be reduced to 30.5% and the small business rate will be reduced to 14.5% on July 1, 2008.
- (2) The general tax rate will be reduced to 31.5% on July 1, 2008.
- (3) The general and the M&P tax rates will be reduced to 32.5% on July 1, 2008.
- (4) The small business rate was reduced from 15.3% on April 1, 2008.
- (5) The tax rate for M&P profits eligible for the small business deduction is 13.5%.
- (6) Provincial sales tax applies on GST. Effective combined rate is 12.875% in Québec and 15.5% in PEI.
- (7) As part of the HST (combined rate is 13% with GST).
Manitoba Budget Report 2008 is a publication of BDO Dunwoody LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. Additional information can be obtained from your nearest BDO Dunwoody LLP office or through our Internet World Wide Web home page at www.bdo.ca.
