By: Elisabeth Saftiuk, Vice President of Policy and Government Relations, Manitoba Chambers of Commerce
To say the last couple of years have been easy for business would not be an understatement.
Inflation has increased sharply across the world over the past year. Global supply challenges, elevated commodity prices, and the invasion of Ukraine all contributed to inflation in Canada. Global and domestic pressures combined to push inflation to 40-year highs.
When prices go up, money can’t buy as much as it used to. This loss of purchasing power hurts everyone’s standard of living. When inflation is high, consumers, businesses and investors are uncertain about what their costs will be from one day to the next. High inflation is often unstable and unpredictable, and that keeps the economy from performing at its best.
Manitobans have felt the impact of high inflation this past year, including having to pay higher prices for groceries, fuel, and housing. Inflation is especially challenging for people on fixed incomes, and it’s bad for business.
In a post-pandemic era, inflationary pressures have combined with unprecedented labour shortages, and this pairing of volatile factors has made for an economically challenging time for thousands of Manitoba businesses.
It has therefore never been more important than in today’s globally competitive business environment that government creates a climate that attracts new businesses, is conducive to new investment, and that enables existing businesses to grow and to thrive.
Earlier this year, the Manitoba Chambers of Commerce retained Leger to conduct the 5th annual Manitoba Business Outlook Survey of its members and partners. The primary purpose of this research is to provide the Chamber with statistically reliable feedback from Manitoba businesses about their goals, performance, and challenges.
This year, only 50 per cent of business leaders in Manitoba believe that Manitoba’s business climate is competitive with other provinces (down from 61 per cent in 2021).
A review of Manitoba’s taxation framework was an initiative that the Manitoba Chambers of Commerce, and Manitoba’s business community, had long been asking for, and one that has had the full support of the Chamber Network for years.
It is precisely for this reason that the Manitoba Chambers of Commerce has had a long-standing policy asking the provincial government to undertake a review of both personal and corporate taxes, with a focus on tackling economic competitiveness through taxation.
When we look at the nationwide economic competition landscape, Manitoba has not kept pace with other provinces for close to 20 years. This is especially so when we consider the way in which we are taxed in Manitoba.
Let’s consider a young Manitoban who has recently graduated from a post-secondary institution with a degree, diploma, or certificate fresh in hand. When considering their future, they will look at where they can get a job, where they can keep more of the money they earn, and where their quality of life will be best. Manitoba youth are doing their research.
When they do this research, they will learn that Manitoba has been at the bottom of the pack on the Basic Personal Amount (the income we can earn before it is taxed).
Perhaps even more problematic from a competitiveness perspective is that our tax brackets have long been out of sync with our provincial neighbours.
Businesses make decisions in the same way that people do. Businesses are not restricted by borders, and they will go wherever they can be most successful. A friendlier tax framework is absolutely a part of their decision-making.
As the demand for skilled workers grows, Manitoba must take a generational look at how we can compete with other provinces. Alberta, Saskatchewan, and Ontario have capitalized on areas where they can make the biggest impact on attracting workers, and it has left Manitoba playing catchup.
This is why Budget 2023 was so important for Manitoba’s economy. By taking bold swings, the provincial government confirmed a focus on tax competitiveness.
The personal taxation measures announced in this year’s budget included an increase to the Provincial Basic Personal Amount, from $10,145 in 2022 to $15,000 in 2023, bringing us in line with the rest of the country.
They also took bold swings on personal income taxes, announcing increases to both the lowest and highest tax brackets beginning in 2024. The lowest tax bracket will now apply to the first $47,000 of income earned (up from $34,431 in 2022). The highest tax bracket will now apply only on income earned over $100,000 (up from $74,417 in 2022).
Combined, these personal income tax measures will allow Manitobans to keep more of the money they earn. Most importantly, these measures will help to move the dial on improving Manitoba’s economic competitive position in the country. This is good for Manitobans and it’s good for business.
Budget 2023 also increased the payroll tax exemption threshold to $2.25 million, eliminating payroll taxes for 150 employers and hinting that eliminating the payroll tax might be next. Considered a disincentive to growth, reducing and eventually eliminating the payroll tax has consistently been a priority for business in Manitoba and for the Manitoba Chambers of Commerce.
In 2023, with a highly mobile workforce and labour shortages across the country, a competitive economic landscape is intrinsically linked to our ability to compete for talent. We need to keep moving the dial on these critically important issues and we have to continue taking away reasons for people to leave Manitoba.
Read the rest of the Summer 2023 MBiz Magazine here.