On April 17, 2012, Finance Minister Stan Struthers presented the 2012 Manitoba budget. This year’s budget aims to return the province to a balanced budget by 2014, and focuses on reducing government spending while protecting important family interests, including schools, hospitals and roads. It is estimated that this year’s budget will lead to a reduction in government spending of roughly 3.9 percent in comparison to 2011.
Manitoba also announced several significant tax changes in this year’s budget, as summarized below.
Commodity Tax Measures
Retail Sales Tax
Effective July 1, 2012, retail sales tax will apply to certain designated personal services in Manitoba. Services becoming taxable include:
- spa treatments;
- non-medical skin and nail services (such as manicures, pedicures and facials);
- tattooing, body piercing and similar services; and
- hair services (including hair removal and augmentation, hairstyling and haircuts costing more than $50).
Note that haircuts costing $50 or less will continue to be exempt from retail sales tax.
Manitoba’s provincial sales tax will apply to certain types of insurance contracts, effective July 1, 2012. Similar to the existing retail sales tax on insurance premiums in Ontario, the following types of insurance will become taxable:
- property and casualty insurance;
- group life insurance;
- trip cancellation insurance;
- baggage insurance; and
- land titles insurance.
The application of retail sales tax will be determined based on the residence of the insured person or the location of the property in respect of which the insurance premiums have been paid. Note that health, accident, sickness and individual life insurance, as well as Autopac vehicle premiums, will not be subject to tax.
Taxable Use of Demonstrator Vehicles
As of May 1, 2012, the existing simplified calculation for the retail sales tax payable by a motor vehicle dealer on the temporary use of a vehicle will increase to $40 per month for new vehicles and $20 per month for used vehicles. These monthly amounts are currently $30 and $15, respectively.
The current sales tax exemption for sand and gravel purchased by municipalities will be expanded to include recycled asphalt. This change is effective May 1, 2012.
In an effort to reduce the tax administration burden placed on business, the province has announced that the filing frequency for certain businesses will be reduced after the June 2012 filing period. The existing monthly retail sales tax return filing threshold of $1,000 or more of average monthly sales tax will be raised to $5,000 or more. Similarly, the quarterly filing threshold will be adjusted from between $500 and $999 in average monthly sales tax to between $500 and $4,999. The threshold for annual filers will be average monthly sales tax of less than $500.
The province has also indicated that eligible businesses will be contacted regarding their new filing options, based on the revised criteria.
Effective at midnight on April 17, 2012, tobacco tax rates have been increased as follows:
- the tax rate per cigarette has risen by 2.5 cents to 25 cents;
- the tax rate per gram of fine-cut tobacco has been increased by 2.5 cents to 24 cents; and
- the tax rate per gram of raw leaf tobacco has risen by 2.5 cents to 22.5 cents.
The tax rate on cigars remains at 75% of the retail price, to a maximum of $5.00 per cigar.
Effective May 1, 2012, the fuel tax rate on unmarked (or clear) gasoline and diesel fuel will increase by 2.5 cents per litre from 11.5 cents to 14 cents. In addition, marked gasoline, which was previously exempt, will be subject to a 3 cent per litre fuel tax. However, there will be no changes made to the tax rates on propane, locomotive fuel, aviation fuel and heating fuel.
In an effort to encourage improved tax remittance compliance, the interest rate on tax debts will be increased by 2 percent, from prime plus 4 percent to prime plus 6 percent. This increase will take effect on July 1, 2012.
In addition, to reflect increasing administrative costs, the fee for dishonoured tax payments will be increased by $5 per item, from $20 to $25, effective May 1, 2012.
Corporate Income Tax Measures
Corporation Capital Tax on Financial Institutions
The 3 percent Corporation Capital Tax on Financial Institutions will be increased to 4 percent for taxation years ending after April 17, 2012.
Data Processing Investment Tax Credit
A new refundable income tax credit will be available for property or equipment purchased for use in a data processing centre in Manitoba after April 17, 2012 and before 2016. The tax credit is equal to 4 percent for building purchases and 7 percent for machinery or equipment purchases.
Co-op Education and Apprenticeship Credits
The following enhancements will be made to these income tax credits for employees that qualify after 2012:
- Early-Level Apprentice Hiring Incentive – increased to 15 percent (up from 10 percent) of wages and salaries, to a maximum of $3,000 per year per apprentice (up from $2,000);
- Advanced-Level Apprentice Hiring Incentive – increased to 10 percent (up from 5 percent) of wages and salaries, up to a maximum of $5,000 per year per employee (up from $2,500); and
- Journeypersons Hiring Incentive – increased to 10 percent (up from 5 percent) of wages and salaries, up to a maximum of $5,000 per year per employee (up from $2,500).
Also, an additional Rural and Northern Apprenticeship refundable tax credit equal to 5 percent of salaries and wages will be introduced.
Further details on the 2012 Manitoba budget are available on the province’s web site at:
Manitoba Budget 2012.