2011 Manitoba Budget Report
April 12, 2011
Highlights
- Deficit of $467 Million Projected for 2010-11
- Deficit of $438 Million Forecast for 2011-12
- Books to be Balanced by 2014-15
- Personal Tax Credit Amounts Increased
- Manufacturing Investment Tax Credit Extended
- Corporate Tax Rates Remain Unchanged
Overview
"Steady Growth. Positive Results."
On April 12, 2011, the Honourable Rosann Wowchuk presented her second budget as Minister of Finance. This budget continues as an extension to the five-year plan presented in last year's budget, and the Minister states that the province is on track to return to a budget surplus by the 2014-15 fiscal year. The deficit for the 2010-11 fiscal year has been revised downward from $545 million to $467 million. A deficit of $438 million is forecast for the 2011-12 fiscal year.
The Minister announced today that funding for municipal infrastructure and transit grants will be linked to the equivalent of one percentage point of the existing provincial sales tax which will provide for future revenue growth to municipalities for infrastructure funding. Spending changes were also announced to increase support for families and communities, provide better health care, increase education and training investments and strengthen innovation.
Tax relief was announced in today's budget, mostly on the personal front. The basic personal credit amount will be increased by $1,000 over four years, starting with a $250 increase for 2011. The spousal amount and eligible dependent amount will also be increased. Taking a page from the recent federal budget, Manitoba will also implement a new Children's Arts and Cultural Activity Tax Credit. Other personal tax credits were also enhanced or extended.
For corporations, tax rates will remain unchanged while a number of credits have been extended or expanded. The Tobacco Tax rate will be increased effective midnight, April 12, 2011.
The following is a summary of the more important items of interest to our clients.
Manitoba Summary Budget Projections
(in millions $)
|
|
|
Original Estimate
2010/2011
|
Revised Forecast
2010/2011
|
Projected
2011/2012
|
|
Revenue
|
12,720
|
13,130
|
13,421
|
|
Expenditures
|
(13,265)
|
(13,597)
|
(13,859)
|
|
Summary net income (loss)
|
(545)
|
(467)
|
(438)
|
PERSONAL TAX CHANGES
Personal Income Tax Credits
Today's budget announced a $1,000 increase in the basic personal amount, the spouse or common-law partner amount and the eligible dependent amount by 2014. The amounts will rise incrementally over four years with the amounts being increased from $8,134 to $8,384 in 2011, $8,634 in 2012, $8,884 in 2013 and $9,134 in 2014.
Basic Education Property Tax Credit
Starting in 2011, the basic Education Property Tax Credit is increased from $650 to $700. This credit is a refundable tax credit that reduces property taxes payable by homeowners and provides residential tenants with an annual income tax benefit. The basic tax credit will be subtracted from property tax bills for homeowners with sufficient property taxes, starting in 2011. Residential tenants who pay at least $4,750 in annual rent will benefit from the increased basic credit when they file their income tax return, beginning with their 2011 returns filed in 2012.
Seniors' Education Property Tax Credit
The maximum Seniors' Education Property Tax Credit will be increased from $800 to $1,100 by 2013. The amount will increase from $800 to $950 in 2011, $1,025 in 2012 and $1,100 in 2013. This is in addition to the increase of the basic Education Property Tax Credit discussed above.
Children's Arts and Cultural Activity Tax Credit
Today's budget announced a new Children's Arts and Cultural Activity Tax Credit for 2011 in order to foster enriching extra-curricular activities for children. This credit is a 10.8% non-refundable income tax credit on eligible activity costs of up to $500 annually for a child under the age of 16 and up to $1,000 for a child with a disability under the age of 18 on whom at least $100 is spent on eligible activities.
This credit will recognize organized and supervised arts and cultural activities taking place in Manitoba and outside a school's regular program, including: supervised lessons in music, dramatic arts, dance and visual arts; language instruction; natural environment and wilderness activities; private tutoring in school subjects; and the development of interpersonal skills. Children's organizations, including Girl Guides, Scouts, 4-H and Cadets will also qualify.
Primary Caregiver Tax Credit
The budget proposes that starting in 2011, the Primary Caregiver Tax Credit be increased by 25% from a maximum annual amount of $1,020 to $1,275. This tax credit was introduced in 2009 to provide recognition and financial support to Manitobans who serve as volunteer primary caregivers to assist care recipients to live independently in their own homes. One volunteer caregiver can claim up to three care recipients at one time, for a potential maximum annual tax credit of $3,825. The fully refundable tax credit is claimed on the volunteer caregiver's income tax return and is not income tested.
Mineral Exploration Tax Credit
The budget proposes that the Mineral Exploration Tax Credit, which is scheduled to expire with respect to flow-through share agreements entered into after March 2012, be extended to cover flow-through share agreements entered into before April 1, 2015. The tax credit is a 30% non-refundable personal income tax credit for Manitoba residents who invest in eligible flow-through shares of qualifying mineral exploration companies. There is no cap on the maximum eligible investment by an individual investor, and no limit on the maximum amount of tax credits claimable in a given year.
Community Enterprise Development Tax Credit
The budget proposes that the Community Enterprise Development Tax Credit, which is scheduled to expire on December 31, 2011, be extended to December 31, 2014. This non-refundable personal income tax credit encourages Manitobans to invest in enterprises in their communities. Eligible enterprises can apply to issue up to $1,000,000 in tax creditable shares to Manitoba investors. Investors receive a 30% tax credit on a maximum annual investment of $30,000 (up to $9,000 in tax credits). Shares acquired through an individual investor's Registered Retirement Savings Plan or Tax-Free Savings Account are also eligible for the tax credit.
Fertility Treatment Tax Credit
As previously announced, the refundable Fertility Treatment Tax Credit will be amended retroactive to October 1, 2010 when the credit began:
- To allow the tax credit to be claimed by either spouse or partner, but not split between spouses or partners;
- To recognize fertility treatments provided by Manitoba physicians and clinics;
- To cover medications prescribed by a licensed physician in Manitoba for fertility treatments even if the medications are tied to fertility treatments received outside of Manitoba; and
- To clarify that fertility treatments to reverse elective sterilization procedures such as vasectomies or tubal ligations do not qualify for the tax credit.
BUSINESS TAX CHANGES
Manufacturing Investment Tax Credit Extended
The Manufacturing Investment Tax Credit provides corporations with a 10% credit on the purchase of new and used buildings, machinery and equipment for use in manufacturing or processing in Manitoba and was set to expire on December 31, 2011. Today's budget announced that this credit will be extended to December 31, 2014. This credit is currently 70% refundable. The remaining 30% can be applied against Manitoba tax in the year earned or it can be carried back three years or forward 10 years to reduce Manitoba tax.
Cultural Industries Printing Tax Credit Introduced
The budget proposes the introduction of a 15% refundable Cultural Industries Printing Tax Credit for Manitoba printers. The new credit will be based on eligible printing costs incurred and paid after April 12, 2011 and before 2015 in the production of eligible books. Qualifying costs are amounts invoiced by the Manitoba printer to the publisher of a book for printing, assembly and binding services performed in Manitoba. A publisher cannot be related to the Manitoba printer and must be carrying on business in Canada. Eligible books will include hardcover or paperback format Canadian-authored non-periodical publications categorized as fiction, non-fiction, poetry, drama, biography or children's books, and will not be limited to first editions. Certain exclusions will apply, including corporate and vanity publications, directories, agendas, catalogues, calendars, loose-leaf publications, colouring, sticker and activity books, as well as books containing advertising other than the publisher's own promotional material.
Book Publishing Tax Credit Changes
The Book Publishing Tax Credit is a 40% refundable tax credit for publishers on eligible Manitoba labour costs plus non-refundable author advances, with an annual maximum tax credit amount of $100,000. The budget has proposed to extend the credit to December 31, 2014, as it was set to expire at the end of 2011. The budget has also proposed enhancements to the credit. Eligible expenses will be expanded to include non-refundable monetary advances and labour costs related to publishing an electronic or digital version of an eligible literary work. As well, the bonus applied to Manitoba printing costs for printing eligible books on paper with a minimum of 30% recycled content is increased from 10% to 15%. These enhancements will be effective for eligible expenses incurred and paid by a publisher after April 12, 2011.
Neighbourhoods Alive! Tax Credit Introduced
This is a new tax credit that was announced to promote community economic development and to assist Manitobans facing barriers to employment. This unique and innovative tax credit encourages corporations with a permanent establishment in Manitoba to support and work with charitable organizations to establish new social enterprises in Manitoba. The newly created social enterprise must be fully owned and controlled by a charitable organization in Manitoba, with a charitable purpose that matches the charity, and a mandate that includes hiring hard-to-employ Manitobans facing multiple barriers to employment.
Corporate donations provided in the year prior to the establishment of the social enterprise and during the first three years of the social enterprise are eligible for the 30% tax credit. Eligible donations must be made after April 12, 2011 and before 2020 to qualify for the tax credit.
The maximum tax credit a corporation can earn in a given year is $15,000, based on a minimum $50,000 donation made to a qualifying registered charity in the previous year. The corporation must provide in-kind services to the charity during the year to support developing, managing and operating a new social enterprise.
The tax credit offsets Manitoba corporation income tax otherwise payable. Tax credits earned but unused by a contributor in a given year can be carried back up to three years, but no earlier than a tax year ending after April 12, 2011, and any remaining credits can be carried forward up to 10 years.
Co-op Education and Apprenticeship Tax Credits
The Co-op Education and Apprenticeship Tax Credits are a family of income tax credits that provide incentives to employers who offer work experience to young Manitobans. Certain of these credits are scheduled to expire on December 31, 2011, and the budget proposes to extend these credits to December 31, 2014.
The Co-op Education and Apprenticeship Tax Credits include:
- the Co-op Students Hiring Incentive for placement of students in post-secondary co-operative education programs. This credit pays 10% to a maximum of $1,000 for wages paid for the placement of post-secondary co-op program students;
- the Co-op Graduates Hiring Incentive for hiring graduates of co-op programs. This credit pays 5% to a maximum of $2,500 for wages paid to a co-op graduate in each of the first two years of employment;
- the Journeypersons Hiring Incentive for hiring recent graduates of apprenticeship programs. This credit pays 5% to a maximum of $2,500 for wages paid to a newly certified journeyperson in each of the first two years of employment;
- the Advanced-Level Apprentices Hiring Incentive pays 5% to a maximum of $2,500 for wages paid to an apprentice who completes Levels 3, 4 or 5 of their trade with the employer; and
- the Early-Level Apprentices Hiring Incentive which pays 10% of net wages to a maximum credit of $2,000 per year per Level 1 or 2 apprentice employee.
All components of the tax credit are fully refundable. Eligible employers include taxable corporations or exempt corporate entities (including not-for-profit agencies, Manitoba Crown entities, municipalities, universities, schools and hospitals). Unincorporated employers may claim the refundable credit on their individual income tax return. In addition, the province is examining ways to simplify the application process for the credits. These tax credits must be pre-approved by Manitoba Finance prior to being claimed through the income tax system.
Odour Control Tax Credit
The Odour Control Tax Credit, scheduled to expire on December 31, 2011, will be extended to December 31, 2014. The tax credit was established in 2004 to provide a 10% non-refundable corporate income tax credit for businesses that invest in capital property for the purpose of preventing, eliminating or significantly reducing nuisance odours arising from the use or production of organic waste. In 2006, the credit was expanded by making it refundable to agricultural producers, including individual farmers. The maximum refundable credit is equal to the total of Manitoba income tax payable and the amount of property taxes paid on Manitoba farmland by the agricultural producer in the year in which eligible capital property was acquired.
Renouncing Tax Credits
A taxpayer can elect to renounce, in whole or in part, the Manitoba R&D Tax Credit. This ability to renounce a tax credit will be extended to the Manufacturing Investment Tax Credit and the Odour Control Tax Credit.
Capital Tax Exemption for Small Banks
Bank, trust and loan corporations in Manitoba are subject to capital tax at a rate of 3% of their taxable paid-up capital. The budget has proposed to provide an exemption from the 3% capital tax to banks with taxable paid-up capital under $4 billion, effective for taxation years ending after April 12, 2011.
OTHER CHANGES
Tobacco Tax Increased
The Tobacco Tax is increased effective today at midnight. The rate will rise on cigarettes from 20.5 cents to 22.5 cents per cigarette, on fine-cut tobacco from 19.5 cents to 21.5 cents per gram and on raw leaf tobacco from 18 cents to 20 cents per gram.
Emissions Tax on Coal
Starting January 1, 2012, coal used in Manitoba will be subject to a new Emissions Tax equal to $10 per tonne of carbon-dioxide-equivalent emissions. Beginning on January 1, 2014, coal used for space and water heating will be banned in Manitoba. In 2014, coal used for generating electricity or for industrial purposes will continue to be subject to the Emissions Tax.
Green Energy and Equipment Tax Credit
The Green Energy Equipment Tax Credit is a refundable income tax credit that is available to individuals, institutions and businesses.
Effective for installations after April 12, 2011, the total Green Energy Equipment Tax Credit on geothermal heating systems is increased from 10% to 15%.
The tax credit for Manitoba manufacturers of qualifying geothermal heat pumps will increase from 5% to 7.5%. The tax credit for purchasers of qualifying made-in-Manitoba geothermal heat pumps installed in Manitoba will also increase from 5% to 7.5%. The tax credit applicable to other eligible installation costs for geothermal heating systems installed in Manitoba will increase from 10% to 15%.
The tax credit for purchasers of solar heating systems will remain at 10%. The province is also considering broadening the 10% tax credit to made-in-Manitoba transformers and converters which are sold for use in Manitoba.
Sales Tax Exemption on Biomass Materials
Commencing May 1, 2011, the sales tax exemption on straw pellets used for heating or cooking is expanded to include biomass materials.
Sales Tax Exemption for Municipal Flood Protection
The sales tax exemption for municipalities is expanded commencing March 1, 2011 to include sandbag-filling services and the following flood protection materials: flood tubes, sand/salt mixtures for sandbags and sandbag ties.
Land Transfer Tax Exemption
The Land Transfer Tax exemption on transfers of title between common-law partners will be amended, retroactive to 2004, to include partners registered under The Vital Statistics Act. Eligible transferees can apply for a refund of tax paid.
Farmland School Tax Rebate Increased
The Farmland School Tax Rebate is a provincial rebate that offsets school taxes paid on farmland. The rate of this rebate will increase from 75% to 80% starting in 2011.
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 12, 2011.
|
|
Top 2011
Personal Rates
%
|
2011
Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small
Business
%
|
2011
Provincial
Sales
Tax
%
|
|
BC
|
43.70
|
26.50
|
26.50
|
13.50
|
7.00(6)
|
|
Alta.
|
39.00
|
26.50
|
26.50
|
14.00
|
-
|
|
Sask.
|
44.00
|
28.50
|
26.50
|
15.50(1)
|
5.00
|
|
Man.
|
46.40
|
28.50
|
28.50
|
11.00
|
7.00
|
|
Ont.
|
46.41
|
28.50(2)
|
26.50
|
15.50
|
8.00(6)
|
|
Qué.
|
48.22
|
28.40
|
28.40
|
19.00
|
8.50(7)
|
|
NB
|
43.30
|
27.50(3)
|
27.50(3)
|
16.00
|
8.00(6)
|
|
NS
|
50.00
|
32.50
|
32.50
|
15.50
|
10.00(6)
|
|
PEI
|
47.37
|
32.50
|
32.50
|
12.00
|
10.00(7)
|
|
Nfld.
|
42.30
|
30.50
|
21.50
|
15.00(4)
|
8.00(6)
|
|
Yukon
|
42.40
|
31.50
|
19.00
|
15.00(5)
|
-
|
|
NWT
|
43.05
|
28.00
|
28.00
|
15.00
|
-
|
|
Nunavut
|
40.50
|
28.50
|
28.50
|
15.00
|
-
|
(1) The small business rate will be reduced to 13% on July 1, 2011.
(2) The general business rate will be reduced to 28% on July 1, 2011.
(3) The combined general business and M&P rates will be reduced to 26.5% on July 1, 2011.
(4) The small business rate decreased from 16% effective for fiscal periods beginning on or after April 1, 2010.
(5) The tax rate for M&P profits eligible for the small business deduction is 13.5%.
(6) As part of the HST (combined rates are 15% in Nova Scotia, 13% in Ontario, New Brunswick and Newfoundland & Labrador, and 12% in British Columbia).
(7) Provincial sales tax applies on GST. Effective combined rate is 13.925% in Québec and 15.5% in Prince Edward Island.
The information in this publication is current as of April 12, 2011.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
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