By Kate Jackman-Atkinson, myWestman
NEEPAWA, Man. — As we start the run up to the next provincial election, the government has been busy trying to convince voters that it’s small business friendly. It’s an interesting move for the NDP, long seen as the party of large unions.
The most recent announcement, made last week, came out of this year’s provincial budget. As part of the budget, the government has raised the tax free income threshold for corporations from $425,000 to $450,000. This means that businesses can earn up to that amount without paying corporate provincial income taxes, eliminating more taxes for small businesses. This is good news for the 2,000 small businesses the government expects will benefit from the change.
On $500,000 of taxable income, provincial corporate income taxes range from a low of $9,000 in Manitoba, up to $40,000 in other provinces. Starting next year, when the new rules are in place, Manitoba corporations will pay only $6,000 in taxes on $500,000 of taxable income.
The impact is real and Finance minister Greg Dewar notes that Manitoba is still the only province that has eliminated the small business tax. He adds that since 1999, the NDP government’s changes have resulted in $3.8 billion in savings for Manitoba small businesses.
We all know how important small businesses are, especially in rural areas. These businesses are vital to our communities, providing us with goods, services and employment. They make our communities feel like home.
They are also very important to the economy, the Business Development Bank of Canada (BDC) keeps data about businesses and has found that 98.2 per cent of Canadian businesses have fewer than 100 employees. Just over half of Canadian businesses, 54.9 per cent, are micro business, having between one and four employees.
According to BDC, the top four categories of small businesses are retail, other services, construction and professional, scientific and technical services. These types of businesses are prevalent on every Main Street across our region. Helping these entrepreneurs and their hard-working staff is very important, but there is just one catch in the government’s most recent initiative.
The catch is that many of these small businesses, the backbones of our rural economies, will not be benefitting from the province’s changes to the small business tax threshold. Many aren’t incorporated and only corporations will benefit from the changes.
According to Statistics Canada data released last year, in 2010, there were roughly 0.6 million self-employed people in rural and small town Canada, representing 21 per cent of total employment. How many tradespeople or hairdressers, for example, do you know who are incorporated? Looking at the common categories of small businesses, it would appear that few of them will benefit from the newly announced tax breaks.
Instead these entrepreneurs are paying personal taxes, with Manitoba’s notoriously low basic personal exemption. In Manitoba, the basic personal exemption remains at $9,134, the fourth lowest in the country. No changes were announced in this year’s budget.
Talking about tax breaks for small businesses sounds great, but if the province is serious about keeping money in the pockets of small business owners, they would have invested in raising the basic personal exemption. A higher basic personal exemption would benefit all Manitobans, including the smallest of small business owners.