Winnipeg may be the cheapest city in Western Canada and the U.S. Midwest in which to operate a business, but it still has a long way to go before it can claim to be the most tax competitive.
A new report by KPMG ranks Winnipeg second last among 15 Canadian cities when it comes to corporate tax competitiveness.
That's even worse than two years ago, when the last KPMG Focus on Tax report was issued. At that time, Winnipeg was ranked 12th out of 16 Canadian cities studied.
"Since 2012, Winnipeg has fallen behind both Quebec City and Montreal, primarily due to Manitoba increasing its sales tax rate from seven per cent to eight per cent," the 2014 report states.
The corporate taxes examined included income taxes, capital taxes, sales taxes, property taxes, miscellaneous business taxes and statutory labour costs, which include payroll taxes.
In addition to ranking each city in terms of its overall corporate tax competitiveness, the report also looked at how 107 cities around the world, including the 15 in Canada, stack up in terms of their tax competitiveness for four specific types of businesses: manufacturing, digital services, corporate services and research and development.
In Winnipeg's case, the results were decidedly mixed.
For example, it also came in second last among the 15 Canadian cities when it comes to its tax competitiveness in both the digital services and corporate services sectors. The report blames that on the non-refundable provincial PST and on the city's high business tax rate.
But it fared a little better -- 11th out of 15 -- in the manufacturing sector, and a lot better -- fifth out of 15 -- in the R&D sector.
The main reasons for the higher R&D ranking was a low corporate tax rate for those types of businesses and the province offering a partially refundable 20 per cent R&D tax credit, said Duane Lamoureux, a tax partner in KPMG's Winnipeg office.
Lamoureux noted while Winnipeg didn't stack up well against most of the Canadian cities studied -- Sudbury, Ont. was the only one with a lower overall ranking -- it was more tax competitive than any of the U.S. cities included in the study.