Monday, October 3rd, 2005
By: Mia Rabson
Manitoba has some of the highest taxes in Canada and has lost its competitive edge, a new report shows.
The Chartered Accountants of Manitoba today released the first instalment of The MB Check-Up, a three-part report outlining Manitobaâ€™s attractiveness within Canada as a place to invest, live and work.
The first phase dealt with investment and a comparison of business and personal taxes found Manitoba does not have a good image when it comes to attracting new people to the province.
People moving to Manitoba should be prepared for high provincial income taxes.
A single person earning $80,000, a two-income family of four earning $90,000 or a two-income family of four earning $60,000, all pay more of their income to the provincial government than they would if they lived in B.C., Alberta, Saskatchewan or Ontario.
The report did not list the provinces east of Ontario. Manitoba has reduced its corporate tax rate 1.5 points since 2002, but at 15.5 per cent, it still has the second-highest corporate tax rate in the west.
Only Saskatchewan, at 17 per cent, had a higher corporate rate.
Gary Hannaford, CEO of the Institute of Chartered Accountants of Manitoba, said he gives the NDP government credit for reducing taxes somewhat in Manitoba, but said it hasnâ€™t done enough to keep Manitoba competitive with tax levels in other provinces.
He said when a business is looking at places to set up shop or expand, tax rates play a huge role in the decision making-process. And when they look at Manitoba, they see high taxes. And while Manitoba plans to further reduce the corporate income tax to 14 per cent by January 2007, Hannaford noted British Columbia has already committed to reducing its rate to 12 per cent, and Albertaâ€™s is already at 11.5 per cent.
Comparing after-tax profits of corporations, the report found Manitoba dragged behind their western counterparts.
The average Manitoba corporation had after-tax profits worth just 8.2 per cent of the provincial Gross Domestic Product, compared to 17 per cent in Saskatchewan and Alberta.
The Canadian average was 10.7 per cent. Hannaford said Saskatchewanâ€™s higher corporate tax rate is compensated for by higher profits in the oil and gas sector.
Speaking about Manitobaâ€™s high personal taxes, Hannaford said the province really needs to become more competitive to higher-income people if it wants to drive economic growth and attract businesses to Manitoba.
â€œPeople who are leading businesses are people earning at that $80,000 level or higher,â€ said Hannaford.
One area where Manitoba did compare somewhat favourably was on the debt to GDP ratio. The ratio, which is a comparison of what a province makes versus what it owes, is 18.9 per cent.
The figure does not factor in debt-loads of crown corporations like Manitoba Hydro, which in Manitoba has a debt larger than the governmentâ€™s.
Alberta has a zero debt to GDP ratio, and B.C.â€™s ratio is slightly better than Manitoba at 18.2 per cent. But Saskatchewan is at 20.8 per cent, Ontario is 24.5 per cent and the national average is 22.1 per cent.
Manitobaâ€™s ratio has also steadily declined over the last five years, from 22.6 per cent in 1999 to the 18.9 per cent in 2004.
Manitoba Finance Minister Greg Selinger said the reportâ€™s figures are accurate but not all-inclusive. He said Manitoba has the lowest cost-of-living in the country based on utility rates, car insurance and housing costs.
And he said while our taxes might be higher, in the end itâ€™s still cheaper to live and do business in Manitoba.
â€œWe end up winning on cost of living,â€ said Selinger. â€œThis only gives part of the story. People donâ€™t make decision based on one factor. They look at everything.â€
Hannaford acknowledged cost-of-living is a factor and said the next two instalments of The MB Check-Up take that into account. And he said Manitoba comes off better in both of them.
Tory leader Stuart Murray said Manitobaâ€™s record on taxes and competitiveness is shameful.
He noted a recent budget update in British Columbia listed Manitoba as having the highest taxes for middle income earners of any province in the country, not just Western Canada.
Murray said even Saskatchewan has surpassed Manitoba. He said the province has to outline a long-term significant tax reduction plan, and also said the government has to reign in its spending.
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