Breaking News for Manitoba: Budget Cuts Personal and Business Taxes

In introducing a new carbon tax on September 1, 2018, the Manitoba provincial government is planning to return at least some of it back to taxpayers by way of personal and business tax cuts, while it grapples with debt servicing costs that have exceeded a billion dollars for the first time. 

In Manitoba’s most recent budget of March 12, 2018, the fine print also notes the province is bracing for the potential of interest rate increases and further complications in forecasting due to federal tax hikes.

Lately, forecasting has been tricky for provinces.  The province suffered a net $100-million collapse of personal income tax revenues over two years, due to federal tax changes; specifically, an increase in top federal tax rates effective January 1, 2016, which caused high-income earners to plan their affairs to pre-report income sources in advance of this implementation date.  Manitoba did announce an improvement in their deficit over what had been expected, pegging it at $726 million.  However, the province expects further complications that may impact Manitoba’s revenues as a result of the federal government’s increased taxes on split income and new rules on passive investment in private corporations.

1. Still, Manitobans can expect to see a reduction of 1 percent in the provincial sales tax before 2020 and the following personal and business tax changes:

2. The Basic Personal Amount will increase due to indexing once again, in what the government calls the largest ever enhancement to the non-refundable tax credit. The revenue impact is $156 Million.  However, the increases are set at $109 real dollars per year ($2020 in increases in the BPA by 2020), which still means that the province is taxing inflation-eroded dollars.

3. The Personal Income Tax Brackets will be indexed to inflation by the Manitoba Consumer Price Index (CPI), and will continue to be indexed.

4. The Primary Caregiver Tax Credit will be simplified. Only a registration form will be required to verify caregiving has been provided for at least a 90-day period before caregivers can claim a flat $1,400 credit. The requirement to calculate the credit on the number of days care was provided is eliminated, effective immediately.

5. The Education Property Tax Credit will be based on school taxes paid, effective in tax year 2019, and the $250 deductible will be eliminated. In addition, first-time homeowners who are eligible to apply for the $700 basic credit will be able to self-assess and notify their municipal offices throughout the year. If this is done before the printing of the tax statement, the credit will be automatically applied for the year; otherwise the credit will be applied for on the income tax return, with a credit on the property tax statement appearing the following year.

On the business tax side, the following changes will take place:

1. The Small Business Income Limit eligible for Manitoba’s 0 percent tax rate will increase from $450,000 to $500,000, effective January 1, 2019. That’s the same time the federal small business tax rate drops to 9 percent and CPP premium rates begin to rise, making Manitoba a province attractive for smaller businesses to start and grow. The full-year tax savings are expected to be $7 Million.

2. Chiropractors in Manitoba can now provide professional services through a corporation.

3. A New Child Care Centre Development Tax Credit will be introduced to help corporations that are not engaged primarily in child care services to build licensed child care centres for employees at work, effective March 13, 2018, and ending before 2021. The credit is $10,000 per new infant, claimable over five years. The number of spaces will initially be limited to 200 but may be increased over time.

4. The Small Business Venture Capital Tax Credit has been enhanced. Effective March 12, 2018, the $15 million revenue cap has been eliminated and the investment minimum reduced from $20,000 to $10,000 in order to access this 45-percent investment tax credit which offsets Manitoba taxes payable.

5. Provincial Labor-Sponsored Funds Tax Credits have been eliminated entirely for shares acquired after 2018.

6. The Rental Housing Construction Tax Credit has been eliminated as of January 1, 2019. Projects currently underway have not been affected.

7. The Manitoba Book Publishing Tax Credit and Cultural Industries Printing Tax Credit have both been extended by one year.

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