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While it is true the Manitoba Government has engaged in some tax relief, questions are continuing to arise about the quality of our tax regime. There is the growing debate about the Harmonized Sales Tax (HST) – Manitoba is one of the few provinces without an HST. Then there is the issue of Manitoba’s infrastructure deficit. Some have called for an increase in the Provincial Sales Tax (PST) to address that deficit, while others have called for a point from the current level of the PST.
The Manitoba Chambers took the opportunity of its 2011 AGM to canvass the views of its members on these complex issues.
It prepared a discussion paper (click here to access); had Graham Starmer, President of the Manitoba Chambers of Commerce provide some preliminary remarks; and had MNP’s John Jeninga provide a presentation on the HST.
Below you will find a brief bio of John, videos of Graham and John’s presentations, John’s PowerPoint, and a transcript of the discussion that followed.
John Jeninga: John Jeninga is a member of MNP’s Indirect Tax Group. Based in Winnipeg, he provides advice, interpretation, and solutions on GST/HST, PST, and other indirect tax matters. He also provides assistance and representation for audits, assessments, and appeals.
With 20 years of experience in indirect tax, John provides a wide range of services for Canadian residents and non-residents. His expertise includes advising on the GST and PST consequences of major transactions, such as capital acquisitions and real property transactions, as well as reviewing and analyzing indirect tax issues for public and private partnership entities.
Prior to joining MNP, John was a Senior Technical Analyst with the Canadian Revenue Agency (CRA), where he participated in the introduction and implementation of the GST. Today he helps clients deal with CRA and provincial government audits and assessments.
John received a Bachelors degree with honours in Business Administration from the Richard Ivey School of Business, where he majored in accounting. He has served as an instructor and facilitator for a GST Introductory Legislation Course at the Red River Community College and presented numerous workshops and seminars for businesses, charities, and not-for-profit organizations.
Click here to access John Jeninga’s PowerPoint on the HST.
Infrastructure Improvement and Efficient Tax Strategies: Transcript of Discussion
Dave Angus: We stopped talking about HST for a while and the headache has returned as we again try to navigate that issue, it’s very complicated. We need to make a decision from the perspective of what is in the best interests of Manitoba – incremental change on the tax front or a complete reinvention of our revenue model? I absolutely prefer the later because the former would mean that we would do nothing, much like we have done nothing on HST.
The challenge that we have is a tax model that is completely dysfunctional, and that’s across all three levels of government. If you just look at the provincial taxes, I believe our model limits economic growth. We reward companies for staying small, we penalize them when they grow – the opposite of what we are tying to accomplish when it comes to an economic strategy.
I believe we are competitive on the wrong taxes. We have the most competitive tax rate for companies with $400,000 of revenue or lower. Once you grow past that we have some of the highest taxes in the country and certainly the highest in Western Canada.
So we have a very competitive small business tax, a very competitive fuel tax, very competitive Hydro rates, but we have very uncompetitive payroll tax, corporate income tax and personal income tax rates in Manitoba, and I don’t believe that is going to serve us in terms of trying to grow our economy.
The other reality is it is almost impossible for us to develop any type of long-term strategies because much of the funding for infrastructure, as an example, is hit and miss – it’s based on programs that have a beginning and end, with criteria that change, with absolutely no certainty, and we ask our municipalities for twenty-year infrastructure plans with absolutely no way to figure out how they are going to pay for it over twenty years.
I think the question is, “is change necessary?”, and I believe it is, but should it be incremental change or wholesale change?
And I think we have to throw everything on the table, I believe we have to start talking about Hydro rates, about whether we should be going to market rates and increasing the dividend that goes back to the Manitoba Government and use that dividend to address some of our other tax issues.
I believe we have to talk about corporate tax and payroll tax and join western Canada in terms of the competitive framework if we want to be part of the west.
We have to look at the notion of a city sales tax, either on a revenue neutral basis or incrementally, to give the municipalities the ability to have a revenue source that grows with the economy but also where the people can decide whether to eliminate it or to increase it for a particular project, much like they do in the United States.
We have to come to grips with gas tax, which, frankly, is the most appropriate user fee, for infrastructure and roads. We have some of the lowest in the country.
We just had a discussion at the municipal level on property tax versus frontage levies in terms of which is more appropriate for funding infrastructure.
We should talk about toll roads for new infrastructure, the ultimate user fee.
We should talk about development fees and public private partnerships.
All of these issues need to be put on the table.
I think it is time for us to reinvent the revenue model for Manitoba.
I am not sure we have the political will or courage to implement the HST any time soon until we start to see a flight of companies.
The flipside is we need to be just as creative on the efficiencies side. Increasing tax revenue for the sake of going into inefficient spending or a lack of accountability and transparency in terms of how that money is spent is a mistake.
My preference is for a wholesale change.
Gerry Glatz: To pick up on Dave’s comments, would it not be wise to maybe strike a group or committee who would discuss all these options and come up with a proposition for this group? It is difficult to come to any terms here and explore all the avenues with the little time we have.
Brian Kelly: There are many that have a concern about a HST being applicable to a broader base of goods and comment that it would therefore cost more for those with very low incomes more and they will be worse off. What have other provinces done to offset that fact?
John Jeninga: First of all, you have to recognize that HST would in fact lower grocery prices. It doesn’t apply to residential housing, although there is some embedded tax is residential housing. When you talk lower income, those two items account for most of your expenses, so there would be no impact.
Secondly, I would argue that Manitoba has one of the broadest PST bases in the country, so you are not really expanding the tax base that much. Try to think of what is exempt in Manitoba.
It will be broader to an extent for sure, but if you take away the compounding effect the bottom line is that one of Premier Selinger’s main objections to HST was revenue loss. That means people will be paying less tax – I believe a $200M loss.
I think it is a perception issue. Ontario did a good job of marketing it, B.C. did a horrible job.
I don’t think Manitoba will have a choice. It won’t be the next government, but I would be surprised if we don’t have it the term after that.
Unidentified Speaker: It is pretty obvious the HST would be most beneficial to business but I think the biggest hurdle is it is a hard sell for Manitobans to buy into that. A research project or something with the numbers to back it up would be beneficial.
Dave Angus: I think a lot of study has been done about the HST in terms of cost to the consumer and the savings to business and that is the issue – the tax savings largely accrue to the business community and there is cynicism in terms of what would happen to prices. That is why I don’t think we are able to just do that in Manitoba. In Ontario they tied it to a whole bunch of things, including exemptions. We need to take that type of approach because the public is going to say “what’s in it for me?”
I agree that we should have a task force that collects this information but we need to take our time with it. Take a year to gather the information as a policy priority for the chamber movement. We need to engage other stakeholders because it isn’t just provincial, it’s municipal, and come forward with it as an annual effort and campaign that we bring back to the chamber movement each AGM.
Graham Starmer: Based on the consensus I am hearing, we will refer this to the Policy Committee who will report to the Board and then the assembly at the next AGM.