2011-2012 Resolution: Payroll Tax Reform

Mar 25, 2011 | Chamber News

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. 

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. 

Note: This Resolution carries on from a 2010-2011 Resolution. Click here to access that history.

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 15, 2011: The 2011-2012 Resolutions were posted on the MCC website, listed as part of a comprehensive Report on AGM 2011 and then notice of this story was circulated through a news release as well as in an MCC E-Update which is sent to all MCC members, Media and Government.

June 22, 2011: 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 Minister of Finance
  • Minister of Entrepreneurship, Training and Trade

September 2, 2011: The Manitoba BOLD campaign highlighted this issue with a news release entitled “Manitoba BOLD Campaign Focused on Taking Manitoba to a Whole New Level.” 

The announcement included the following:

“The Manitoba BOLD Platform recommends the following policy measures to achieve this:    

  • Reduce the number of companies that pay the payroll tax over the next four years through a threshold approach.”

To read more click here

The Manitoba Chambers of Commerce was proud to be part of the BOLD initiative. In edition to posting this story on the MCC website it was mentioned on the MCC’s social media sites (Twitter, Facebook LinkedIn) and in its E-Update newsletter (goes out to 8,000 community and business leaders). As well, the MCC posted all announcements made by the parties during the election and each of those posts highlighted the BOLD initiative and provided links to further information on the BOLD recommendations.   

Developments:

July 27, 2011:  The Honourable Rosann Wowchuk, Minister of Finance, wrote to the Manitoba Chambers of Commerce on this issue.

Here is her response:  

The Honourable Rosann Wowchuk

With regard to the comments concerning the Health and Post Secondary Education Tax Levy, I would first like to thank the Manitoba Chambers of Commerce for acknowledging the extensive tax relief that has occurred under this government since 1999.  

The Manitoba Health and Post Secondary Education Tax Levy is imposed on annual payrolls above $1.25 million. It is important to note that the full rate of 2.15 per cent only applies if a company’s annual payroll exceeds $2.5 million. Those companies with an annual payroll between $1.25 million and $2.5 million do pay the levy, but at a reduced rate. In addition, only about three per cent of private sector employers, or five per cent of all employers, pay the levy. Of the four provinces that levy a health and education tax, Manitoba has the highest exemption rate. British Columbia, Ontario and Quebec also impose health care premiums which corporations often pay on behalf of their employees.   

In terms of labour costs, we believe they are a competitive advantage for Manitoba employers. The 2010 average hourly rate for employees in Manitoba was $19.44. This compares favourably to other provinces: the hourly rate in Saskatchewan was $21.69 in 2010 and in Alberta it was $24.02.    

This competitive advantage is maintained even for those employers who exceed the exemption threshold and pay the levy. Manitoba’s lower average wages are in line with Manitoba’s lower living costs. Also, Manitoba’s job creation continues to be among the strongest in Canada, while the province’s unemployment rate continues to be among the lowest in Canada.  

September 26, 2011: A Winnipeg Free Press editorial entitled “Manitoba’s tax on jobs stifles growth” touched upon this issue. 

It stated, in part, as follows: 

“A relatively small number of corporations pay a payroll tax, which is applied to businesses with payrolls of more than $1.25 million. That, essentially, is a business with 25 employees, each paid $50,000. But the levy is a considerable chunk of the taxes corporations pay. A business with a payroll of about $30 million pays $670,000. For publicly traded companies it will be the tax paid provincially.

That puts into some perspective Mr. Gerrard’s promise; it would make a huge difference to many businesses investing — adding jobs — in Manitoba. Gary Filmon leapt into politics because, as a newly minted small-business owner, he discovered he was being taxed on the wages he paid to employees — a tax on jobs, he declared, a ridiculously punitive policy that acted as a disincentive to hire. As premier, Mr. Filmon took the tax off thousands of businesses, gradually raising the payroll exemption to $1 million, which Gary Doer subsequently increased to $1.25 million.” 

To read more click here.

September 29, 2011: A Winnipeg Free Press article entitled “Opposition leaders promise to take action on payroll tax” touched upon this issue. 

It stated, in part, as follows: 

Premier Greg Selinger said he wouldn’t touch the tax, but instead look at other measures to encourage business investment and growth. 

To read more click here.

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