2008 Manitoba Budget Highlights
Economic Strength for an Unpredictable Future April 9, 2008
Key Tax Measures From the 2008 Budget
Manitoba Minister of Finance, Gregory F. Selinger presented Manitoba’s 2008 Provincial Budget on April 9, 2008. Below are highlights of the major tax changes that were announced.
I. PERSONAL INCOME TAX MEASURES
a) Rate Changes Budget 2007 introduced a multi-year plan to further lower personal income tax rates and increase bracket thresholds. This year’s budget confirms the 2009 rate changes. Changes proposed subsequent to 2009 are subject to balanced budget requirements.
First Bracket Rate 10.90% 10.80% 10.70% 10.50% Middle Bracket Threshold $30,544 $31,000 $32,000 $35,000 Middle Bracket Tax Rate 12.75% 12.75% 12.75% 12.75% Top Bracket Threshold $66,000 $67,000 $68,000 $70,000 Top Bracket Tax Rate 17.40% 17.40% 17.40% 17.40%
2008 2009 2010 2011
b) Measures that Parallel Federal Budget 2008 Government Proposals
Tax- Free Savings Account (TFSA) – The Federal government proposed a new savings vehicle that would allow Canadian residents to earn tax-free investment income. Beginning in 2009, individuals age 18 and older will be permitted to contribute up to $5,000 annually (indexed) to a TFSA. While contributions to a TFSA are not tax deductible, income earned in the savings plan will not be taxable and all withdrawals will be tax-free. Manitoba has proposed to adopt the TFSA for Manitoba Personal Income Tax purposes. The province also indicates that they will not use any withdrawals from a TFSA to reduce other provincial benefits that are normally income-tested (which includes the Personal Tax Credit, the Education Property Tax Credit, the School Tax Credit for Homeowners and Tenants, the Manitoba Shelter Benefit, Pharmacare, and child-care subsidies).
Northern Residents Deduction – The Federal government will increase the residency deduction by 10% beginning in 2008 (from $7.50 to $8.25 per person per day and from $15 to $16.50 per day for a sole claimant in a household). Manitoba will automatically adopt this proposal once approved. c) Other Personal Tax Measures Basic Personal Amount - will increase by $100 to $8,134 effective January 1, 2009 ($8,034 in 2008).
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2008 - MANITOBA BUDGET HIGHLIGHTS
Key Tax Measures From the 2008 Budget
Spousal Amount and Eligible Dependent Amount - will increase to match the basic personal amount of $8,134 effective January 1, 2009 ($8,034 in 2008). Primary Caregiver Tax Credit –introduction of a new credit for eligible caregivers in Manitoba. Effective in 2009, a refundable credit is provided equal to $85 a month to a maximum of $1,020 per year after a 3-month qualifying period. Community Enterprise Development Tax Credit – this credit was previously introduced in 2003 to encourage Manitobans to invest in community-based enterprise development projects. A nonrefundable personal income tax credit equal to 30% on a maximum of $30,000 investment in equity capital is available. The Budget extends this credit until the end of 2011. Manitoba Mineral Exploration Tax Credit – consistent with the one year extension provided by the Federal government, Manitoba will extend the 10% non-refundable personal tax credit for one year, to flow-through share agreements entered into before April 1, 2009. This credit relates to the purchase of flow-through shares in exploration companies which finance Manitoba exploration projects.
II. CORPORATE INCOME TAX MEASURES
a) General Income Tax Rate
The Minister confirmed that the previously announced income tax rate reductions for 2009 to 12% will take effect July 1, 2009. The Province also announced its intention to reduce the income tax rate to 11% in the future. b) Small Business Tax Rate and Dividend Tax Credit Rate The Minister has also confirmed last year’s small business tax rate reduction to 1% effective January 1, 2009. The non-eligible dividend tax credit rate will also be reduced from 3.15% to 2.5% to maintain personal and corporate income tax integration. The following table summarizes these corporate tax proposals:
2008 GENERAL CORPORATE INCOME TAX RATE SMALL BUSINESS CORPORATE TAX RATE SMALL BUSINESS LIMIT
1. 2.
2009
(1)
FUTURE YEARS
(1)
13% 2.0% $400,000
12% 1.0% $400,000
11% 1.0% $400,000
(2)
Effective July 1st Effective date to be determined, subject to balanced budget requirements.
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2008 - MANITOBA BUDGET HIGHLIGHTS
Key Tax Measures From the 2008 Budget
c) Measures that Parallel Federal Budget 2008 Government Proposals
Accelerated Capital Cost Allowance (CCA) for M&P Machinery and Equipment To parallel the Federal budget, Manitoba will temporarily increase the CCA for eligible M&P equipment (acquired on or after March 19, 2007) for an additional 3 years. Specifically, the 50% straight-line treatment will apply for one additional year for M&P machinery and equipment purchased in 2009 and the accelerated treatment will then be provided on a declining balance basis in 2010 and 2011.
d) Other Corporate Tax Measures
Co-op Education and Apprenticeship Tax Credit - a replacement for the Co-operative Education Tax Credit, the Co-op Education and Apprenticeship Tax Credit adds a new component to include a Journeypersons Hiring Incentive. It will provide a tax credit to employers that hire recent graduates of apprenticeship programs for the first two 12-month periods of full-time employment of a journeyperson working in Manitoba. The credit is equal to 5% of salaries and wages paid to the journeyperson up to $2,500 per 12-months of employment per journeyman. Eligible employers include taxable corporations, not-for-profit agencies, Crown corporations, municipalities, universities, schools, hospitals, or unincorporated entities. Manufacturing Investment Tax Credit – 10% of the cost of qualifying manufacturing property is eligible for the MITC, a portion of which is refundable. As previously announced, the refundable portion of the credit is increased from 35% to 70%, effective January 1, 2008. This year’s budget proposes to extend the credit to December 31, 2011 (previously scheduled to expire on June 30, 2009). Film and Video Production Tax Credit – proposal to introduce a 5% bonus credit for films with a Manitoba producer and doubles the frequent filming bonus to 10%. The percentage of eligible salaries paid to non-residents eligible for the credit has also been increased from 20% to 30% of eligible salaries paid to Manitobans. Interactive Digital Media Tax Credit – new credit introduced to support the development of interactive digital media products with a refundable income tax credit equal to 40% of eligible Manitoba labour costs. Book Publishing Tax Credit – new credit introduced to support industry expansion with a refundable income tax credit equal to 40% of eligible Manitoba labour costs and an additional 10% bonus for books printed on forest friendly paper.
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2008 - MANITOBA BUDGET HIGHLIGHTS
Key Tax Measures From the 2008 Budget
III. CORPORATION CAPITAL TAX MEASURES
Budget 2008 confirms the phase-out of the corporate capital tax with the eventual elimination after December 31, 2010. The budget also proposes to eliminate the capital tax for manufacturing and processing corporations effective July 1, 2008.
IV. OTHER TAX MEASURES
Emissions Tax on Coal – effective July 2011, the government proposes to introduce a new emissions tax on the burning of coal, equal to $10 per tonne of carbon dioxide equivalent emissions. Education Property Tax Credit – increase in the basic amount of the credit to $600 (previously $525). Smoking Cessation Products – effective May 1, 2008, Retail Sales Tax (RST) will be eliminated for prescription and non-prescription smoking cessation products. Farmland School Tax Rebate – the Province will increase the Farmland School Tax Rebate to 70% in 2008 (up from 65% in 2007). Community Enterprise Investment Tax Credit - the province proposes to increase the maximum annual investment limit by an investor to $450,000 (previously $150,000). However, the maximum annual tax credit that can be claimed by an investor remains at $45,000. This increase is retroactive to January 1, 2008.
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