Finance & Taxation | Manitoba

Manitoba budget 2020 reduces PST, resurrects old carbon levy and lowers payroll taxes

March 23, 2020

Somewhat insignificant in the realities of COVID-19, on Thursday, March 19 Manitoba’s 2020 budget was announced and features a further reduction of its provincial sales tax, lower payroll taxes, and the return of a “made in Manitoba” carbon tax. The announcement also reflects recent commitments to invest in retail crime reduction strategies and advance other green initiatives. 

Manitoba PST Reduction – July 1, 2020

Surprising most, days before the 2020 budget the Manitoba government announced its intention to reintroduce a Manitoba alternative to the Federal Carbon levy, along with a commitment to use all proceeds towards the lowering of the provincial PST rate from seven to six percent, effective July 1, 2020. 

  • This is the second year in a row that Manitoba has lowered its PST rate, and as of July 1, Manitoba will have the second lowest PST rate across the country, next to Alberta (no PST) and tied with Saskatchewan (six percent).
  • The change will put more than $325 million back into the hands of Manitobans annually, and will especially be felt by households making large purchases, and businesses who have PST costs within their supply chain.

New Manitoba Carbon Tax – July 1, 2020

On July 1, 2020 the Manitoba government will implement a flat $25-per-tonne “made-in-Manitoba” Green Levy, replacing the presently applied Federal Carbon price in the province, that starting at $20 per tonne on April 1, 2019 and was to escalate $10 per tonne annually until 2022.

This is the second time around for Manitoba’s plan that was first introduced in 2018, before being withdrawn by the Premier following a dispute with the Federal government.  The Manitoba Government has stated that they would challenge any attempt by the Federal Government to top up their $25 per tonne fixed rate carbon tax as the national rate is increased, arguing that similar to special exceptions provided to other provinces, Manitoba’s significant clean hydro investments should be included.

Should the Federal government not introduce a top up levy, the average Manitoba household will save $200 annually by 2022.

Manitoba Carbon Tax Rates Applied on Fuels (2019-2022)

Fuel Type 2019 (Federal Plan) 2020 (Manitoba $25) 2021 (Manitoba $25) 2022 (Manitoba $25)
Gasoline (c/L) 4.42 5.30 5.30 5.30
Natural Gas (c/m3) 3.91 4.74 4.74 4.74
Diesel (c/L) 5.37 6.74 6.74 6.74
Propane (c/L)   3.87 3.87 3.87

Small Business Payroll Tax Cut – January 1, 2021

For years RCC has argued that Manitoba’s payroll tax suppresses job growth, as it imposed a tax on wages paid by employers.  Manitoba’s payroll tax thresholds have not changed since 2008.

Budget 2020 includes an important step forward, and as of Jan. 1, 2021, Manitoba will increase the following payroll tax thresholds:

  • employers with an annual payroll of $1.5 million or less will be exempt (up from the current $1.25 million exemption threshold).
  • employers with an annual payroll between $1.5 million and $3 million will pay 4.3 percent on the amount within this range (up from the current range of $1.25 million to $2.5 million); and
  • employers with an annual payroll above $3 million will pay 2.15 percent of their total payroll (up from the current $2.5 million threshold). 

The increased thresholds are expected to benefit approximately 1,000 small and medium sized employers in Manitoba.

Retail Security Investments

Retail crime is a serious problem for retail businesses across Manitoba. Over the past three years, not only have retailers seen an increase in the frequency of property crime, but they have also seen increases in violent crime occurring within their businesses.  

As a direct result of RCC’s leadership, Budget 2020 contains financial investments through Manitoba’s Minister of Justice in support of collaborative efforts with Manitoba retailers, community and law enforcement partners to address retail theft as  part of its efforts to address crime and gang activity through improved intelligence sharing and other measures.

RCC hopes the work through a Minister lead Retail Crime Task Force will lead to dramatically improved crime prevention conditions for members in Manitoba over coming months.

Environment Commitments

The Minister positioned this in also a “green” budget, as it provides investments to support Manitoba’s Climate and Green Plan that is expected to include the following retail related actions in coming months:

  • Development of an appliance stewardship program to increase recycling of household appliances, including managing of whitegoods products containing refrigerants such as Freon or other ozone-depleting substances including appliances such as refrigerators, freezers, air conditioners and dehumidifiers;
  • Propose to develop a plan to introduce industry-funded stewardship programs for all corded appliances by 2022;
  • Enhancing green transportation through Increasing biofuel mandates to the highest in Canada;
  • Reduce waste sent to landfills by reforming recycling and waste management, particularly plastics, organics, electronics and white goods;
  • Eliminating the use of plastic bags in Manitoba.

Other Budget Highlights

  • Budget 2020 forecasts a summary deficit of $220 million for the 2020-2021 fiscal year, down from $325 million deficit for 2019.  The Government remains on track to table a balanced budget during the current term of government by 2023, and has nearly a billion in a rainy day fun to address floods and issues like Covid-19.
  • For the third year in a row, interest and debt servicing costs on our provincial debt will exceed $1 billion. It would still require 82 consecutive years of balanced budgets after 2023 — and $100 million in annual debt payments — before Manitoba will be debt free.
  • Budgeted expenses have been held to 3.4% on a budget-to-budget basis, with Federal transfers expected to increase by $295 million in 2020, to $5.136 billion
  • Retail sales taxes are one of the most stable sources of government income, and with the 2019 reduction, overall PST revenues fell by $222 million.
  • Among provincial departments, the big winner was education, health and infrastructure.
  • Government included a modest $15 million in Cannabis related revenues, maintaining that the costs of health care and oversight remain almost as much as the income earned from their wholesale operations.

Next Steps

  • This is the first budget of the Manitoba Progressive Conservatives new mandate.  In the fall 2019 election, the PC government maintained its strong dominance and solid majority.
  • COVID-19 retail discussions remain the priority, however the Government has made several retail related commitments that RCC will continue to work closely with government on.  These include refining labour regulations, deregulation of retail hours, and the government’s commitment to look for ways to modernize the wine, beer and liquor retailing system in a manner that enhances the role of the private sector. Manitoba will also move to an open retail market for cannabis (similar to AB), in an effort to displace the black market.
  • RCC will also continue to advocate for a broader review of the overall tax and regulatory pressures Manitoba retailers face.

If you have any questions or concerns, please do not hesitate to contact: John Graham, Director, Government Relations (Prairie Region) at 204-926-8624 or [email protected].

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