It may come as a surprise to many of you to learn that Winnipeg is one of the most affordable major cities in Canada in which to run a business.
Naysayers in this community spend great quantities of time talking about how much we've fallen behind other provinces when it comes to creating a welcoming environment for business. But in KPMG's 2008 Competitive Alternatives Report, an annual ranking based on the total cost of doing business, Winnipeg does pretty well.
KPMG examines 27 "business cost components" including taxation. Scores are assigned, with a score over 100 meaning the city is more expensive than the average U.S. cost structure; under 100 means less costly for business.
Of the nine largest cities in Canada, Winnipeg ranked second only to Saskatoon in overall cost competitiveness with a score of 97.7; the most costly city in Canada in which to do business was Vancouver (104.2) followed by Calgary (102.0) and Toronto (101.5). Even more remarkable is that in terms of overall tax burden, KPMG found Winnipeg had the lowest effective corporate income tax rate of the nine Canadian cities.
The KPMG report was released earlier this spring. But just last week, the industrious souls at the Canadian Centre for Policy Alternatives dusted it off to further the debate. According to CCPA research associate Ian Hudson, a professor of economics at the University of Manitoba, the KPMG findings are evidence that Manitoba is actually good place to do business.
"Far from having an economy unattractive to investors, Manitoba's before- and after-tax profitability ranks among the best in the nation; its costs and taxation levels are among the lowest," Hudson wrote. "Far from the sky falling, these have been sunny days for Manitoba business, a fact that, unsurprisingly, rarely comes up when they are lobbying for continued tax cuts."
While Hudson is unlikely to find consensus with his analysis, it does raise interesting questions about where the province's economy is going. It is quite remarkable that at a time when oil is king and the Canadian dollar is at par with the U.S. dollar, Canadian cities like Winnipeg that do not have an economy fuelled by oil prices have been able to retain a business cost advantage. Unfortunately, affordability is not enough on which to build an economy.
There is geography to consider. Frank Stronach's auto parts maker Magna International might find lower real estate, energy and tax rates in Manitoba, but it is unlikely to flee the geographic proximity to automakers in southern Ontario for the Prairies.
There is also vanity. It might also make financial sense for chartered banks to move their headquarters to Winnipeg but there is an incalculable value to those banks of having a Bay Street address on their business cards.
That is not to say some companies would not leap at the opportunity to take advantage of Winnipeg's cost advantage. The KPMG report showed that we are particularly affordable for businesses involved in medical device manufacturing, biomedical research and development, clinical trials management and electronic systems development and testing. These represent many of the value-added qualities desired for the province's economy.
However, those companies would likely look just as much or more at the type of city to which they were moving, and not just the costs of doing business. Corporate recruiters have always conceded that the 'feel' of a community ¬ -- how it looks, how well it works as an urban centre, the kind of amenities available -- plays an important role in relocation decisions.
Rather than continue the tiresome debate about which province has the lowest corporate income taxes, the city and province would be well-advised to start beyond tinkering with tax levels to policies and projects that would draw jobs to Winnipeg.
It is hard not to wince at Mayor Sam Katz's failed promise to bring free Wi-Fi Internet access to the downtown. This is the infrastructure of a modern city, a place that combined with affordability could be fertile ground for business.
It appears Winnipeg is competitive when it comes to the basic costs of doing business. Now we just have to find ways of making the city desirable.
dan.lett@freepress.mb.ca
PREVIOUS
