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Winnipeg Free Press - PRINT EDITION

City ranks badly on business tax

But does well in R&D due to credit

By: Murray McNeill

Posted: 09/26/2012 1:00 AM | Comments: 0

The taxman is giving Winnipeg a bad name.

A new study by KPMG ranks Winnipeg as one of the least competitive cities in Canada -- 12th out of 16 studied -- in terms of overall tax rates for businesses.

That's no better than two years ago, when the last study was done, and Winnipeg ranked 13th out of 15 major Canadian cities.

The good news is that, thanks to a 20 per cent, partially refundable provincial R&D tax credit, Winnipeg is a much more attractive location for research and development. In that business category, it ranks sixth out of 16 -- and higher than any of the other major cities in Western Canada.

But that's where the good news ends. In the other three categories examined -- manufacturing, digital, and corporate services -- it ranked 11th, 12th and 14th respectively.

KPMG's Competitive Alternatives: Focus on Tax study looked at the total tax burden for the four different types of businesses in 55 major cities in 14 countries, as well as in 16 cities in Canada. The taxes examined included corporate income taxes, capital taxes, sales taxes, property taxes, miscellaneous local business taxes and statutory labour costs.

Where Winnipeg fared worst was in the category of "other corporate taxes," which includes capital taxes, provincial sales taxes, property taxes and miscellaneous business taxes. There, it ranked dead last.

"That's what's driving it down the competitive rankings," said Duane Lamoureux, a tax partner in KPMG's Winnipeg office.

Lamoureux said in the corporate income taxes category, it was third-best of the 16.

He said the poor overall ranking is something civic and provincial government officials need to take a hard look at, especially when other western Canadian cities such as Saskatoon and Edmonton rank first and second in tax competitiveness.

Manitoba Chambers of Commerce president Graham Starmer said the provincial government needs to do more than just think about the problem. As soon as it gets its budget balanced again, it needs to start reducing the tax burden on businesses or run the risk of losing companies to other cities, he said.

"We have many taxes in Manitoba that make us uncompetitive with other cities," Starmer said, not least of which is the payroll tax.

"We've had conversations recently with companies that are considering leaving (the province) because they're reaching the threshold where they'll have to pay the payroll tax, and that's going to make them less competitive."

One of the things working in Winnipeg's favour is that another KPMG study released earlier this year ranked it the most competitive city of 25 western Canadian and Midwest U.S. cities in terms of total costs of doing business.

That study looked at 25 key cost elements for businesses, including taxes, labour, real estate and utility costs.

Starmer said while that's good, "It may not be enough to save us" with some companies.

murray.mcneill@freepress.mb.ca

Flaherty wrong,

lobbyist says

OTTAWA -- Finance Minister Jim Flaherty has again called on Canada's corporate community to use their massive cash reserves to invest in the future, only to have his message rebuffed Tuesday by the president of Canada's largest business lobby.

Flaherty told a conference attended by some of the country's most influential business leaders that the government has done its part to create conditions for growth and job creation.

John Manley, the former Liberal finance minister who now heads the Canadian Council of Chief Executives, was in the crowd and didn't care for what he heard.

Rather than sit on corporate profits, Manley said his members -- among Canada's largest 150 firms -- are getting ready to make big investments in the next three years.

"In fact, the anticipated spending on capital investment in Canada from our members alone exceeds all of the federal and provincial stimulus spending during the last downturn," he said.

"That's pretty considerable and I think it's going to pay off in terms of jobs and economic opportunity going forward."

The finance minister's comments came at the conclusion of a two-day conference on Asia and China.

Flaherty in essence was repeating sentiments he and Bank of Canada governor Mark Carney have expressed before.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition September 26, 2012 B5

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