City braces for biz tax shortfall

The City of Winnipeg’s business tax revenues are set to take a major hit as companies buckle under pandemic closures and financial losses.

The city expects to collect $3.7 million less in business taxes than it had anticipated for 2020, $2.9 million of which the municipality expects companies may never pay.

"It really does reflect the fact that businesses in the City of Winnipeg have been hurt by the health orders related to the pandemic," said Coun. Scott Gillingham, council’s finance chairman.

Gillingham (St. James) noted the $3.7-million shortfall would mark a massive increase from outstanding taxes at the end of a typical year. The report notes that amount ranged between $860,000 and $1.3 million from 2017 to 2019.

The city says $59.5 million in business taxes will be billed for 2020, based on financial data up to Nov. 30. The tax department will ask for a $1-million cost overrun after factoring in some savings and cash set aside to cover unpaid taxes.

Chris Graves, owner of the King’s Head Pub, said the city is shouldering only a fraction of the pain felt by business owners.

"I know people can’t even afford to pay their (provincial sales tax) payments right now, let alone their business taxes," said Graves.

He said he questions the fairness of business tax payments in a year when restaurants were repeatedly forced to shut down in-person dining and, at other times, operate with reduced capacity.

"At this point, we are in a six-figure deficit ourselves. The King’s Head, essentially, even with all of the government grants that we’ve been given… we’ve lost over $40,000 a month," said Graves. "It’s been absolutely brutal. We need to open up quickly."

He urged the city to eliminate business taxes altogether, which he suspects would require provincial financial support.

"We truly need relief," said Graves, who said he had to sell his home and vehicle to try to offset his business losses. "Within the next probably eight months, you’re going to see a lot more businesses absolutely collapse."

Loren Remillard, president of the Winnipeg Chamber of Commerce, echoed the call for the elimination of Winnipeg’s business tax.

"We know the hardships faced by small businesses, medium businesses because of COVID. That (elimination) would be a very strong message from city council," said Remillard.

He stressed the chamber appreciates supports the city has already offered to companies, but still hopes more relief is forthcoming. He said the full impact of the pandemic isn’t clear, as many entrepreneurs try to stay afloat long enough for COVID-19 restrictions to be relaxed.

"I think as we move through the first and second quarter of 2021, we’ll get a better sense as to the scope and depth of the negative economic impact," said Remillard.

During the first half of this year, it should also become clearer how many companies will go bankrupt, he said.

Gillingham noted the city has included support to ailing businesses in the 2021 budget, including an increase to the small business tax threshold that will exempt 1,000 more companies from paying the fee.

The city will also let business and property taxes be paid up to three months late without penalty in 2021 and provide $1,500 grants for businesses that were forced to close or reduce service due to pandemic health restrictions.

While the city reduced its business tax every year from 2015 to 2020 and raised the threshold in 2021, Gillingham said eliminating it abruptly would create a major financial loss for the city.

"To eliminate the business taxes in one year would create a $60-million revenue hole for the city," he said.

joyanne.pursaga@freepress.mb.ca

Twitter: @joyanne_pursaga