Province Of Manitoba 18-K/A Annual report (foreign governments) (amended)

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SUMMARY BUDGET 2012/13

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SUMMARY BUDGET

For the Fiscal Year Ending March 31, 2013

With Comparative Data for the Year Ending March 31, 2012

										Per cent Change
										2012/13 Budget from
	2012/13			2011/12			2011/12			2011/12			2011/12
	Budget			Forecast			Budget			Forecast			Budget
	(Millions of Dollars)
REVENUE SOURCE
Income Taxes		3,202			3,141			3,170			1.9	%		1.0	%
Other Taxes		3,788			3,474			3,470			9.0	%		9.2	%
Fees and Other Revenue		2,009			1,837			1,772			9.4	%		13.4	%
Federal Transfers		3,889			4,351			3,972			(10.6	%)		(2.1	%)
Net Income of Government Business		722			761			781			(5.1	%)		(7.6	%)
Enterprises
Sinking Funds and Other Earnings		241			245			239			(1.6	%)		0.8	%
TOTAL REVENUE		13,851			13,809			13,404			0.3	%		3.3	%
EXPENDITURE SECTORS
Health and Healthy Living		5,547			5,286			5,387			4.9	%		3.0	%
Education		3,710			3,576			3,562			3.7	%		4.2	%
Family Services		1,064			1,047			990			1.6	%		7.5	%
Community, Economic and Resource		2,317			2,614			2,340			(11.4	%)		(1.0	%)
Development
Justice and Other Expenditures		928			1,666			901			(44.3	%)		3.0	%
Debt Servicing Costs		858			813			807			5.5	%		6.3	%
TOTAL EXPENDITURE		14,424			15,002			13,987			(3.9	%)		3.1	%
In-Year Adjustments/Lapse		(113	)		(73	)		(145	)
NET INCOME (LOSS)		(460	)		(1,120	)		(438	)

NOTES:

• The 2011/12 Budget numbers originally presented in the 2011 Budget Address and the 2011/12 forecast from the Third Quarter Financial Report have been restated to be consistent with the current presentation for the GRE.

• Details of Expenditure and Revenue for Fiscal Year 2012/13, and a reconciliation to the amounts reported for core government are found in Schedules 1 and 2.

• Program portfolio management review savings have been allocated to Community, Economic and Resource Development (CERD) expenditures.

• In-Year Adjustments/Lapse could be an increase in revenue and/or a decrease in expenditure.

• Numbers may not add due to rounding.

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n  SUMMARY BUDGET 2012/13

Revenue

Revenue in 2012/13, including new revenue measures, is projected to increase $42 million or 0.3% from the 2011/12. Forecast.

Income taxes are projected to increase by $61 million, with a $95 million increase in Individual Income Tax offset by a decrease of $34 million in Corporation Income Tax. Budget 2012 projects a $314 million, or 9.0%, increase in other taxes reflecting growth in retail sales taxes, a $49 million increase in fuel taxes as well as an $11 million increase in tobacco tax. Corporations taxes are forecast to increase by $27 million. Fees and Other Revenue is projected to increase $172 million, or 9.4%. Net Income of Government Business Enterprises (GBEs) is projected to decrease $39 million, or 5.1%. Federal transfers in 2011/12 included recoveries for the 2011 flood.

Expenditure

Total expenditure is budgeted to decrease $578 million or 3.9% from the 2011/12 Forecast.

The growth in Health and Healthy Living expenditure is $261 million or 4.9%. Education-related expenditure is increasing by $134 million or 3.7%. Family Services is up $17 million or 1.6%. Community, Economic and Resource Development expenditure will decrease by $297 million or 11.4%. Manitoba Justice is increasing by $6.3 million or 1.4%. Overall, the Justice and Other Expenditures sector will decrease by $738 million, mainly due to 2011 flood costs. Debt Servicing Costs are expected to increase by $45 million.¹

In Budget 2012, services to people represent 76.4% of spending.

• Health and Healthy Living expenditure makes up 38.5% of total expenditure.

• Education accounts for 25.7% of all expenditure; it includes public schools and post-secondary institutions.

• Family Services, Justice, and Housing and Community Development represent 12.2% of total expenditure.

1 Debt Servicing Costs are forecast to equal 6.2¢ of every dollar of revenue in 2012/13, down 53.0% from 13.2¢ per dollar in 1999/2000.

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Schedule 1

Summary Revenue Estimate: Details and Reconciliation to Core Government Estimates

Fiscal Year ending March 31, 2013 (in Thousands of Dollars)

	CORE GOVERNMENT		CONSOLIDATION IMPACTS			SUMMARY
	Revenue		and Revenue of Other
Source of Revenue	Estimate		Reporting Entities
Income Taxes
Individual Income Tax		2,796,300		-			2,796,300
Corporation Income Tax		405,500		-			405,500
Subtotal: Income Taxes		3,201,800		-			3,201,800
Other Taxes
Corporations Taxes		215,400		-			215,400
Fuel Taxes		296,500		19,600			316,100
Land Transfer Tax		66,200		-			66,200
Levy for Health and Education		410,000		(104,400	)		305,600
Mining Tax		35,000		-			35,000
Retail Sales Tax		1,834,100		-			1,834,100
Tobacco Tax		256,400		-			256,400
Other Taxes		14,705		-			14,705
Education Property Taxes		-		744,447			744,447
Subtotal: Other Taxes		3,128,305		659,647			3,787,952
Fees and Other Revenue
Fines and Costs and Other Legal		51,538		-			51,538
Minerals and Petroleum		28,820		-			28,820
Automobile and Motor Carrier Licences and Fees		147,026		-			147,026
Parks: Forestry and Other Conservation		33,088		-			33,088
Water Power Rentals		117,800		-			117,800
Service Fees and Other Miscellaneous Charges		218,624		1,158,406			1,377,030
Revenue Sharing from SOAs		26,180		-			26,180
Tuition Fees		-		227,786			227,786
Subtotal: Fees and Other Revenue		623,076		1,386,192			2,009,268
Federal Transfers
Equalization		1,872,000		-			1,872,000
Canada Health Transfer		1,062,500		-			1,062,500
Canada Social Transfer		429,200		-			429,200
Health Funds		9,000		-			9,000
Infrastructure Renewal		28,800		-			28,800
Manitoba Floodway Expansion		10,000		-			10,000
Shared Cost and Other Transfers		187,745		289,705			477,450
Subtotal: Federal Transfers		3,599,245		289,705			3,888,950
Net Income of Government
Business Enterprises (GBEs)
Manitoba Liquor Control Commission		260,452		-			260,452
Manitoba Lotteries Corporation		346,000		-			346,000
Deposit Guarantee Corporation		-		19,295			19,295
Manitoba Hydro		-		65,000			65,000
Workers Compensation Board		-		21,140			21,140
Manitoba Public Insurance Corporation		-		10,000			10,000
Subtotal: Net Income of GBEs		606,452		115,435			721,887
Sinking Funds and Other Earnings		-		241,541			241,541
Total Revenue Estimate		11,158,878		2,692,520			13,851,398

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Schedule 2

Summary Expenditure Estimate: Details, Reconciliation to Core Government Estimates and Summary Budget Result

Fiscal Year ending March 31, 2013 (in Thousands of Dollars)

	CORE GOVERNMENT			CONSOLIDATION IMPACTS			SUMMARY
	Expenditure			and Expenditures of Other
Sector/Department	Estimate			Reporting Entities
Health and Healthy Living
Health		5,094,313			363,348			5,457,661
Healthy Living, Seniors and Consumer Affairs		57,862			31,013			88,875
Total Health and Healthy Living		5,152,175			394,361			5,546,536
Education
Advanced Education and Literacy		689,205			507,691			1,196,896
Education		1,632,689			880,875			2,513,564
Total Education		2,321,894			1,388,566			3,710,460
Family Services
Children and Youth Opportunities		44,611			—			44,611
Family Services and Labour		1,032,234			(13,074	)		1,019,160
Total Family Services		1,076,845			(13,074	)		1,063,771
Community, Economic and Resource Development
Aboriginal and Northern Affairs		35,536			(408	)		35,128
Agriculture, Food and Rural Initiatives		226,988			222,825			449,813
Conservation and Water Stewardship		156,037			(4,654	)		151,383
Entrepreneurship, Training and Trade		574,473			8,153			582,626
Housing and Community Development		80,445			137,844			218,289
Infrastructure and Transportation		653,762			(126,428	)		527,334
Innovation, Energy and Mines		87,906			25,474			113,380
Local Government		363,923			3,721			367,644
Total Community, Economic and Resource Development		2,179,070			266,527			2,445,597
Justice and Other Expenditures
Legislative Assembly		40,181			(1,243	)		38,938
Executive Council		2,827			(127	)		2,700
Civil Service Commission		21,643			783			22,426
Culture, Heritage and Tourism		61,350			5,654			67,004
Employee Pensions and Other Costs		16,933			55,000			71,933
Finance		68,081			3,366			71,447
Immigration and Multiculturalism		38,818			13,187			52,005
Justice		460,873			13,912			474,785
Sport		11,970			2,052			14,022
Enabling Appropriations		40,671			—			40,671
Other Appropriations		72,175			—			72,175
Total Justice and Other Expenditures		835,522			92,584			928,106
Debt Servicing Costs		258,000			599,584			857,584
Program Portfolio Management Reviews		(128,000	)		—			(128,000	)
Total Expenditure Estimate		11,695,506			2,728,548			14,424,054
Subtract: Total Revenue Estimate (Schedule 1)		11,158,878			2,692,520			13,851,398
In-Year Adjustments/Lapse		(32,500	)		(80,000	)		(112,500	)
Net Result for the Year		(504,128	)		43,972			(460,156	)
Transfer from Fiscal Stabilization Account		56,065			(56,065	)		—
NET INCOME (LOSS)		(448,063	)		(12,093	)		(460,156	)

Note: In-Year Adjustments/Lapse could be an increase in revenue and/or a decrease in expenditure.

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Revenue, 2012/13

Major Sources

Per cent of Total

Expenditure, 2012/13

Major Sectors

Per cent of Total

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FINANCIAL MANAGEMENT STRATEGY

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n  FINANCIAL MANAGEMENT STRATEGY 2012/13

Financial Management Priorities

The Financial Management Strategy (FMS) sets out the government’s priorities for financial management. It includes five main priority areas with one or more measurable outcomes. Each measurable outcome includes objectives for the current year and for future years.

For 2012/13, the FMS continues to focus on the priority areas identified in prior years and reflects the balanced approach of Manitoba’s Five-Year Economic Plan.

FINANCIAL MANAGEMENT PRIORITY	MEASURABLE OUTCOMES
Transparency, Accountability and Fiscal Discipline	•   Summary Net Income
	•   Maintaining Accountability for Core Government Program Expenditure and Revenue
Stable and Affordable Government	•   Credit Ratings
	•   Expenditures as a Percentage of Gross Domestic Product (GDP)
	•   Strengthening the Management of Public Resources
Managing Debt	•   Debt Retirement
	•   Net Debt to GDP Ratio
Infrastructure and Capital Asset Renewal	•   Capital Investments
Performance Management	•   Continued Development of Performance Management Capacity

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n  PRIORITY AREA – TRANSPARENCY, ACCOUNTABILITY AND FISCAL DISCIPLINE

Government has implemented a number of measures in recent years to ensure financial accountability and maintain fiscal discipline, including:

• implementing GAAP compliant summary financial statements as of March 31, 2005;

• implementing summary budgeting and reporting in 2007/08 to present comprehensive information on the total cost of providing programs and services to Manitobans and how the GRE operates as a whole;

• publishing an FMS as part of the annual budget and a report on outcomes within six months of the end of the fiscal year;

• implementing summary quarterly financial reporting, consistent with GAAP as of 2009/10;

• establishing and implementing plans to eliminate general purpose debt and pension liabilities;

• funding the employer’s share of current service pension contributions for all employees; and

• introducing a multi-year plan in Budget 2010 to address the impact of the global economic downturn.

Government will continue to monitor changes in accounting standards and recommendations from the PSAB to facilitate the presentation of meaningful financial information for end users. The commitment to transparency, accountability and fiscal discipline continues in Budget 2012 with an update on the multi-year plan for 2012/13 and future years.

Measurable Outcome – Summary Net Income

Governments around the world were affected by the economic downturn and, like Manitoba, many were faced with budget deficits as they worked to stimulate the economy and manage expenditures. While Manitoba’s economy has traditionally been one of the most stable in Canada, there was no quick solution to the financial pressures that the province was facing.

The five-year economic plan introduced in Budget 2010 to address the challenges has seen positive results and the government continues to be committed to a balanced approach. With the continuing uncertainty in global economies and the additional fiscal pressures caused by record flooding in 2011, Budget 2012 demonstrates this balanced approach by focusing on:

• investing in vital front-line services to improve health care, education and training, policing and supports for families;

• introducing responsible, innovative ways to reduce the cost of government;

• supporting economic growth and innovation;

• taking steps to ensure the long-term sustainability of infrastructure;

• restoring balance and returning to surplus in Budget 2014; and

• maintaining affordability to keep Manitoba one of the best places to live, work and raise a family.

Challenges remain for the Manitoba and Canadian economies as they continue to expand at a modest pace. The unprecedented flooding in 2011 may have negatively impacted the province’s finances, but Manitoba has a strategy to keep the economy strong and growing, and meet the commitment to return to surplus in Budget 2014.

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Manitoba’s Five-Year Economic Plan

	2010/11			2011/12			2012/13			2013/14			2014/15
	Actual			Forecast			Budget			Projection			Projection
	(Millions of Dollars)
REVENUE
Core Government		10,550			11,146			11,159			11,672			12,141
Other Reporting Entities*		2,655			2,663			2,692			2,667			2,727
TOTAL REVENUE		13,205			13,809			13,851			14,339			14,868
EXPENDITURE
Core Government Programs and Services		10,890			12,171			11,696			11,930			12,171
Other Reporting Entities*		2,613			2,831			2,728			2,730			2,819
TOTAL EXPENDITURE		13,503			15,002			14,424			14,660			14,990
In-Year Adjustments/Lapse **		—			(73	)		(113	)		(145	)		(145	)
SUMMARY NET INCOME (LOSS)		(298	)		(1,120	)		(460	)		(176	)		23

* includes consolidation adjustments

** In-Year Adjustments/Lapse could be an increase in revenue and/or a decrease in expenditure.

The plan assumes GRE revenues will rise by an average of 3.6% annually from 2012/13 to 2014/15, while GRE expenditures are forecast to increase by an annual average of 1.9% during the same period.

Core government revenue is forecast to rise by an average of 4.3% annually while core government expenditure will grow by an annual average of 2.0% from 2012/13 to 2014/15.

Core government projections reflect the commitment to return to surplus while focusing on what matters most to Manitoba families. Budget 2012 makes strategic investments in front-line services, reduces spending growth in other areas and introduces modest measures to increase revenue. While several risks and challenges remain for the national economy, Manitoba’s economic and demographic fundamentals are projected to produce stable economic growth over the next two years.

The Manitoba government is committed to balancing summary net income over the medium term and Budget 2012 introduces more responsible, innovative ways to reduce the cost of government in the third year of the five-year plan:

• reducing the number of regional health authorities from 11 to five to streamline services;

• merging the Manitoba Liquor Control Commission and the Manitoba Lotteries Corporation to reduce overhead and the regulatory costs;

• working with municipal governments to encourage more regional co-operation;

• continue the 20 per cent roll-back on salaries for government ministers;

• defer wage increases and reduce office expenses for Members of the Legislative Assembly;

• reduce travel costs in every government department;

• reduce the number of government-appointed agencies, boards and commissions; and

• implement program portfolio management reviews to reduce expenditures and focus on core government program priorities.

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These measures will reduce duplication and result in more efficient use of public resources and support the return to balance. The responsible plan to restore balance continues to be reflected in legislation that:

• requires the budget shortfall to be eliminated over four years and a return to surplus in 2014/15;

• keeps the legal requirement to have balanced budgets into the future;

• exceeds debt payment requirements under the previous legislation; and

• retains the restrictions that prohibit increases to major taxes without a referendum.

An annual financial management strategy and a report on outcomes will continue to be published. In addition, in-year financial reporting will provide updates on the progress made in achieving our economic recovery plan.

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Measurable Outcome – Maintaining Accountability for Core

Government Program Expenditure and Revenue

Legislation requires government to include a summary of core government expenditures and projected revenues as part of the FMS. This is consistent with the main estimates of expenditure and revenue for the fiscal year.

While core government expenditure will exceed revenue in Budget 2012, the five-year economic recovery plan shows this reversing in Budget 2014. The projection includes allocations from the Fiscal Stabilization Account (FSA) for funding from the federal government for health-related programming and ecoTrust funding as well as for debt servicing costs resulting from the core government deficit.

Core Government Expenditure and Revenue, 2012/13

	$ Millions
Revenue		11,159
Expenditure		11,696
In-Year Adjustments/Lapse		(33	)
		(504	)
Transfer from Fiscal Stabilization Account
Health-related programming		8
ecoTrust		4
Debt Servicing Costs		44
Net Result		(448	)

Year-end information on core government revenue and expenditure for 2012/13 will be provided as part of the FMS report on outcomes, scheduled to be released in the fall of 2013.

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n  PRIORITY AREA – STABLE AND AFFORDABLE GOVERNMENT

Manitoba uses public revenues effectively and efficiently to deliver affordable government programs and services. Manitoba’s per capita spending growth over the past five years has been the fourth lowest of all provincial governments. Keeping programs affordable is achieved by continuing to improve the way government operates and delivers services.

During these uncertain economic times, the government will continue to carefully manage programs and services to protect the priorities of Manitobans.

Measurable Outcome – Credit Ratings

Manitoba continues to maintain its reputation for fiscal responsibility. The five-year plan includes a strategy to repay debt while restoring balance. The province’s measured approach to paying down debt and the pension liability, while dealing with the needs in health care and other program areas, has been positively acknowledged by credit rating agencies.

This is reflected in the credit rating upgrades Manitoba received from Moody’s Investors Service and by Standard & Poor’s through 2007, and through the reaffirmation of Manitoba’s credit quality by rating agencies in the last four years.

During this period of economic and financial recovery, Manitoba’s stable and diversified economy, strong financial position and commitment to responsible financial management will help ensure a steady credit outlook in 2012. The credit rating agencies have acknowledged the challenging economic conditions facing all Canadian provinces.

The Manitoba government remains committed to maintaining fiscal responsibility to achieve stable or improving credit ratings into the future.

Credit Rating Agency	2006 Actual	2007 Actual	2008 Actual	2009 Actual	2010 Actual	2011 Actual	2012 Actual
DBRS	A(high)	A(high)	A(high)	A(high)	A(high)	A(high)	A(high)
Moody’s	Aa2	Aa1	Aa1	Aa1	Aa1	Aa1	Aa1
Standard & Poor’s	AA-	AA-(positive)	AA	AA	AA	AA	AA

NOTE: As at March 31 (end of fiscal year)

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Measurable Outcome – Expenditures as a Percentage of Gross Domestic Product (GDP)

Maintaining stable and affordable government means managing the growth in spending to meet increasing demands for quality services. An effective measure of appropriate spending is the ratio of total expenditure as a percentage of GDP. This ratio has remained relatively stable over the last four years and is budgeted to return to a decline in the ratio for Budget 2012.

Expenditure to GDP ratios are reflected in the following table and as part of Appendix 1, Summary Financial Statistics.

	2007/08			2008/09			2009/10			2010/11			2011/12			2012/13			2013/14
	Actual			Actual			Actual			Actual			Forecast			Budget			Projection
Core Program Expenditure		18.7	%		18.9	%		20.0	%		19.6	%		20.9	%		19.2	%		18.7	%
Other Reporting Entities Expenditure		4.0	%		3.3	%		3.4	%		3.8	%		4.0	%		3.6	%		3.4	%
Debt Servicing Costs		1.8	%		1.6	%		1.5	%		1.4	%		1.4	%		1.4	%		1.4	%
Total Expenditure		24.4	%		23.8	%		24.9	%		24.9	%		26.3	%		24.2	%		23.5	%

The Manitoba government’s objective is to maintain a stable or declining ratio over the longer term.

Measurable Outcome – Strengthening the Management of Public Resources

Sound management and use of public resources are key to making government more effective. Government continues to explore ways to make sure that public spending remains under control and that tax dollars are used effectively and efficiently. Strategically managing and prioritizing expenditures, including limiting discretionary operating costs, on a government-wide basis is an ongoing objective. Reforms have been implemented with other reporting entities to better manage public resources, capitalize on synergies and enhance regional capabilities, expertise and talent. A pause in wage increases was successfully negotiated with many parts of the public sector and a cap on administrative costs for regional health authorities was legislated. Last year red-tape reduction measures were introduced for not-for-profit organizations and this year red tape will be cut for small businesses by reducing how often they have to file sales tax.

Budget 2012 continues to move forward with internal review and reform processes to control growth of government expenditures. A program portfolio management review process is being introduced to improve efficiency and effectiveness of government service delivery through reorganization or reallocation of funding within groups of related programs and services to produce better results at a lower cost. Examples of cost cutting reforms already identified for action this year are:

• reducing the number of regional health authorities;

• reducing the number of Crown corporations by merging Manitoba Liquor Control Commission and Manitoba Lotteries Corporation; and

• reducing the number of government-appointed agencies, boards and commissions.

The target for total in-year savings resulting from internal review processes is $128 million, which is about 1% of core government expenditures.

The government will continue to emphasize reforms that improve accountability and transparency and sustainable programs that protect the priorities of Manitobans.

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n PRIORITY AREA – MANAGING DEBT

Over the years, government has continued to implement specific initiatives to ensure sound fiscal management. These include:

• addressing the unfunded pension liability;

• funding the employer’s share of current service pension obligations;

• ensuring all capital investments are amortized and all related costs are fully reflected in annual appropriations for core government; and

• establishing a plan to address core government deficits during the economic recovery period.

Solid debt management consists of a plan to repay general purpose debt and eliminate the pension liability, while making needed investments in Manitoba. The net debt to GDP ratio is one of the key indicators used by credit rating agencies in their analysis of provincial governments because it measures the level of debt relative to a province’s financial capacity. Like all other Canadian jurisdictions, the impact of the economic downturn has been an increase in Manitoba’s net debt to GDP ratio, but the five-year plan indicates this ratio returning to a downward trend in 2014/15.

Measurable Outcome – Debt Retirement

This government has contributed almost $1 billion to the debt retirement account for general purpose debt and pension obligations. Direct action to address the unfunded pension liabilities for the Civil Service Superannuation Plan (CSSP) and the Teachers’ Retirement Allowances Fund (TRAF) began in 2007/08 with the province borrowing funds that would be invested by these two pension plans on behalf of the province.

Borrowing funds to pay down the previously unfunded pension liability is a sound fiscal decision, as over the longer term, the cost of borrowing is less than the actuarially determined expected rate of return on the plan assets and the rate of growth in the pension liability.

Since 2000, over $615 million from the annual debt retirement payment has been directed to pension obligations. Net investment earnings in the Pension Asset Fund are projected to be $806 million by March 31, 2013. Combined with the $2.6 billion in new investment provided by the government since 2007, a total of $4.0 billion will have been directed to address the unfunded pension liability by March 31, 2013. In addition, Budget 2012 includes $152 million in core government expenditures for the employer’s share of current service pension obligations.

Capital investment continues to be a priority for government in order to support continued economic growth, reduce the maintenance burden and provide for the services Manitobans need in the future. The cost of these assets is amortized over a set period that represents the useful life of the asset as required by GAAP. The end result is increased infrastructure investment for Manitobans accompanied by a fixed discipline for paying down the associated debt.

The investment in tangible capital assets has increased steadily over the last decade, and with the $1.7 billion investment in Budget 2012, is projected to total $17.2 billion at March 31, 2013, with $7.0 billion of related debt retired through accumulated amortization. The net book value of these assets (cost less accumulated amortization) has more than tripled since 1999/2000 to $10.2 billion.

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Tangible Capital Assets – Net Book Value f-Forecast b-Budgeted Source: Manitoba Finance	Manitoba’s communities and the economy have benefited over the years from the significant investment in public capital assets such as health facilities, universities, colleges and schools, as well as infrastructure assets such as roads, water-control structures and parks. To meet the needs of today’s and future generations, it is necessary to continue to invest in renewal of these assets. The public good provided by these investments is immeasurable. It is estimated that the insured or replacement value of these investments exceeds $38 billion.
	Based on projections, core government will have a total of $7.2 billion in capital asset investments at March 31, 2013 and $2.4 billion of related debt will have been retired through accumulated amortization.
	A total of $339 million has been included in core government appropriations to retire debt associated with capital investments – $196 million for amortization of department-owned assets and $143 million for principal payments for education and health-related assets.

After years of surplus, the global economic downturn and the severe flooding in 2011 has had a negative impact on Manitoba’s core government operations. Budget 2010 introduced a five-year plan to stimulate the economy and create jobs, protect key services and return to surplus in 2014/15. In addition, Manitoba’s responsible management of public funds in previous years meant that the FSA had a healthy balance that would be available to mitigate the impact of the short-term deficits that would occur in core government operations.

Replacement Value of Public Assets1 Per cent of Total Totals may not add due to rounding.

Manitoba’s five-year plan incorporates a legislated requirement to dedicate at least $600 million of the balance in the FSA to the amortization of increases in the general purpose debt, including related interest expenses, that are attributable to negative net results incurred during the period of economic recovery. In 2010/11, existing funds in the Debt Retirement Account were withdrawn to repay $145 million of debt and a further $200 million debt repayment was made with withdrawals of $90 million in 2010/11 and $110 million in 2011/12 from the FSA. Budget 2012 provides for an additional debt payment of $140 million, for a total payment of $485 million. With a return to surplus position in Budget 2014, scheduled debt payments for general purpose debt from current resources will resume.

Over the last 11 years, prudent management of public funds has resulted in the actual cumulative total of core government revenue exceeding core government expenditures by over $450 million. Combined with the decisions Manitoba has taken to address the previously unfunded pension liability, budgeting for the employer’s share of current service obligations for all employees, ensuring all capital investments are amortized and all related costs are fully reflected

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in annual appropriations, and continuing to make debt repayments to mitigate core government operating deficits, Manitoba has a solid debt management plan. This is reflected by the fact that debt servicing costs as a percentage of revenue remains constant. Since 1999/2000, the debt servicing cost rate has dropped by 53%, from 13.2¢ of every dollar of summary revenue collected to a forecasted level of 6.2¢ in Budget 2012.

Although the impact of economic uncertainty has slowed progress, the government remains committed to reducing debt over time with an ultimate goal of eliminating the general purpose debt and the remaining unfunded pension liabilities.

Measurable Outcome – Net Debt to GDP Ratio

Net debt is an important indicator of a government’s financial position as this highlights how government services will remain affordable in the future.

Summary net debt is financial assets (such as cash or investments) minus total liabilities (such as loans or financing). It is the remaining liability that must be financed by future revenues.

Net debt may grow from time to time, as needed investments in capital assets – like the Red River Floodway, highway infrastructure and economic stimulus investments – are made. These forward-looking investments help support Manitoba’s economy.	Net Debt to GDP Ratio       Source: Manitoba Finance
Therefore, it is important to measure changes in net debt against the growth of the economy, as measured by the nominal GDP.
The Manitoba government has seen a substantial downward trend in the net debt to GDP ratio, lowering the ratio to a projected level of 26.1% in 2011/12 from 32.9% in 1999/2000, an improvement of 21%.
Manitoba has acknowledged that the net debt to GDP ratio will rise in the short term as the government makes needed investments in infrastructure projects including repairing the damage caused by the 2011 flood and mitigation of the impact of any future floods. In Budget 2012, the net debt to GDP ratio is forecast to increase to 27.4%, with a projected return to a downward trend in 2014/15, as the government remains committed to reducing the net debt to GDP ratio over the longer term.

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n PRIORITY AREA – INFRASTRUCTURE AND CAPITAL ASSET RENEWAL

Building and upgrading Manitoba’s infrastructure has been a priority for the government since 1999. The government reinforced this priority by announcing a four-year, $4.7 billion economic stimulus investment plan in November 2008 to fund key infrastructure projects across the province. In 2011, Manitoba committed to providing the equivalent of one percentage point of the provincial sales tax to support investment in municipal infrastructure and public transit. This investment grows on the success of Manitoba’s economy. Manitoba has also dedicated the revenue raised through fuel taxes to fund public infrastructure.

Measurable Outcome – Capital Investments

Based on principles of sound financial management, Manitoba has been able to increase the assets of the province, while maintaining a sustainable level of debt. Since 2000, the government has invested $10.2 billion in public capital assets, including $3.4 billion for new or renewed hospitals, universities, colleges and public schools; $3.8 billion to upgrade Manitoba’s roads and highways and $3 billion for the Manitoba Floodway, the modernization and improvement of social housing, improving public service buildings, parks and camping infrastructure.

It is estimated that the insured or replacement value of these investments is more than $38 billion (see chart page 16).

Budget 2012 provides the resources to continue upgrading Manitoba’s roads and highways, wastewater treatment plants, health facilities across the province, building and restoring much needed social housing and modernizing our schools and post-secondary institutions.

Budget 2012 includes capital investment of $1.7 billion to support continued economic growth, reduce the maintenance burden and provide for the services Manitobans need in the future as outlined in the table below.

	$ Millions
Roads and Highways (including preservation)		580
Universities, Colleges and Public Schools		296
Health Facilities		250
Water Related Infrastructure		59
Housing (including third-party contributions)		284
Assistance to Third Parties		121
Public Service Buildings		80
Parks and Camping Infrastructure		49
		1,719

Manitoba’s commitment to infrastructure investments and renewal of existing assets, while maintaining a fiscally responsible approach to budgeting and debt management, will continue to deliver benefits to Manitobans.

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n PRIORITY AREA – PERFORMANCE MANAGEMENT

Improving the way government measures both financial and non-financial performance outcomes enhances both transparency and accountability. Outcomes-based reporting provides information on the actual impacts, benefits or changes experienced as a result of a program or government service.

Manitoba continues to apply the eight principles established in 2009 to guide measurement and reporting for government departments and major Crown corporations.

1. The organization’s public purpose is explained.

2. The organization’s priorities relate to overall government priorities.

3. Each organizational priority has objectives and actions to achieve them.

4. Measures are developed with outcomes in mind, focusing on a few critical aspects of performance.

5. Financial and non-financial information are linked.

6. The strategic context for the plan and reported results is discussed.

7. Performance information looks forward and backward in time.

8. Information is clear, relevant, credible and balanced.

These principles will help guide the program portfolio management review process for all government departments. This initiative will incorporate and continue to enhance the performance management work initiated in previous years.

Measurable Outcome – Continued Development of Performance Management Capacity

Manitoba is committed to continuing progress on the measurement of performance outcomes with a focus on SMART (specific, measureable, achievable, reliable, time bound) objectives.

Performance management continues to be refined to support management decision-making in the effective use of public funds with planning, measuring, and reporting activities that integrate financial and non-financial information.

In 2012/13 program portfolio management reviews will provide opportunities for collaboration and building capacity. Key performance measures and performance information for government departments and other entities in the GRE will continue to be included in annual reports and other specialized reports.

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APPENDIX 1

MANITOBA SUMMARY FINANCIAL STATISTICS

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Manitoba Summary Financial Statistics

	2012/13			2011/12			2010/11			2009/10			2008/09			2007/08
	Budget			Forecast			Actual			Actual			Actual			Actual
SUMMARY FINANCIAL STATEMENTS		(Millions of Dollars)
Revenue
Income Taxes		3,202			3,141			2,922			2,659			2,841			2,652
Other Taxes		3,788			3,474			3,406			3,281			3,276			3,288
Fees and Other Revenue		2,009			1,837			1,825			1,792			1,722			1,628
Federal Transfers		3,889			4,351			4,047			3,924			3,866			3,597
Net Income of Government Business Enterprises		722			761			775			772			764			947
Sinking Funds and Other Earnings		241			245			230			220			296			384
Total Revenue		13,851			13,809			13,205			12,648			12,765			12,496
Expenditure
Health and Healthy Living		5,547			5,286			5,120			4,831			4,590			4,232
Education		3,710			3,576			3,341			3,227			3,091			3,224
Family Services		1,064			1,047			1,363			1,295			1,192			1,224
Community, Economic and Resource Development		2,317			2,614			1,972			1,813			1,729			1,420
Justice and Other Expenditures		928			1,666			934			926			882			974
Debt Servicing Costs		858			813			773			756			830			864
Total Expenditure		14,424			15,002			13,503			12,848			12,314			11,938
In-Year Adjustments/Lapse		(113	)		(73	)		-			-			-			-
Net Income (Loss)		(460	)		(1,120	)		(298	)		(200	)		451			558
Provincial Borrowings, Guarantees & Obligations
General Government Programs		8,041			7,789			6,925			6,833			6,400			6,532
General Government Programs - Federal Flood Relief		-			326			-			-			-			-
General Government Programs - Pension Liability		2,595			2,595			2,355			2,175			1,850			1,500
Manitoba Hydro		9,832			9,101			8,362			7,730			7,499			6,794
Other Crown Organizations		2,128			1,868			1,641			1,478			1,341			1,269
Health Facilities		1,283			1,074			1,015			949			831			833
Other		27			41			51			65			78			92
Capital Investments		3,750			3,183			2,546			1,846			1,411			1,084
Subtotal		27,656			25,977			22,895			21,076			19,410			18,104
Other Obligations
Pension Liability		7,051			6,780			6,600			6,392			6,152			5,881
Pension Asset Fund		(5,166	)		(5,076	)		(4,828	)		(4,592	)		(4,161	)		(3,653	)
Net Pension Liability		1,885			1,704			1,772			1,800			1,991			2,228
Debt incurred for and repayable by the Manitoba
Hydro-Electric Board		(9,608	)		(8,847	)		(8,199	)		(7,479	)		(7,177	)		(6,449	)
Education and Health Debt held by Government Enterprises		499			499			471			443			406			416
Other Debt of Crown Organizations		255			255			263			255			262			252
Subtotal		(6,969	)		(6,389	)		(5,693	)		(4,981	)		(4,518	)		(3,553	)
Total Summary Borrowings, Guarantees & Obligations		20,687			19,588			17,202			16,095			14,892			14,551
Adjustments to arrive at Summary Net Debt
Guarantees		(227	)		(254	)		(165	)		(255	)		(326	)		(350	)
Net Financial Assets		(4,137	)		(4,490	)		(4,370	)		(4,030	)		(3,086	)		(3,640	)
Summary Net Debt		16,323			14,844			12,667			11,810			11,480			10,561
Summary Net Debt as percentage of GDP		27.4			26.1			23.3			22.9			22.2			21.6

Numbers may not add due to rounding.

NOTES

•The 2011/12 Forecast has been restated from the Third Quarter Financial Report to be consistent with Budget 2012 presentation.

•Program portfolio management review savings have been allocated to CERD expenses.

•Guarantees reflect only guaranteed balances for Manitoba Hydro Bonds and Manitoba Grow Bonds.

• Borrowings, guarantees and obligations are net of sinking funds.

•Historical results have not been restated to reflect the impact of the 2011/12 reorganization.

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Manitoba Summary Financial Statistics

	2012/13			2011/12			2010/11		2009/10			2008/09			2007/08
	Budget			Forecast			Actual		Actual			Actual			Actual
		(Percentage Change)
Annual Change
Income Taxes		1.9			7.5			9.9		(6.4	)		7.1			8.6
Other Taxes		9.0			2.0			3.8		0.2			(0.4	)		5.1
Fees and Other Revenue		9.4			0.7			1.8		4.1			5.8			9.0
Federal Transfers		(10.6	)		7.5			3.1		1.5			7.5			8.3
Total Revenue		0.3			4.6			4.4		(0.9	)		2.2			9.3
Health and Healthy Living		4.9			3.2			6.0		5.3			8.5			7.0
Education		3.7			7.0			3.5		4.4			(4.1	)		9.4
Debt Servicing Costs		5.5			5.2			2.2		(8.9	)		(3.9	)		9.0
Total Expenditure		(3.9	)		11.1			5.1		4.3			3.1			9.0
Summary Net Debt		10.0			17.2			7.3		2.9			8.7			(2.3	)
		(Per cent)
Per cent of GDP
Income Taxes		5.4			5.5			5.4		5.2			5.5			5.4
Other Taxes		6.4			6.1			6.3		6.4			6.3			6.7
Fees and Other Revenue		3.4			3.2			3.4		3.5			3.3			3.3
Federal Transfers		6.5			7.6			7.5		7.6			7.5			7.4
Total Revenue		23.2			24.2			24.3		24.5			24.7			25.6
Health and Healthy Living		9.3			9.3			9.4		9.4			8.9			8.7
Education		6.2			6.3			6.2		6.3			6.0			6.6
Debt Servicing Costs		1.4			1.4			1.4		1.5			1.6			1.8
Total Expenditure		24.2			26.3			24.9		24.9			23.8			24.4
Summary Net Debt		27.4			26.1			23.3		22.9			22.2			21.6
Per cent of Revenue
Income Taxes		23.1			22.7			22.1		21.0			22.3			21.2
Other Taxes		27.3			25.2			25.8		25.9			25.7			26.3
Fees and Other Revenue		14.5			13.3			13.8		14.2			13.5			13.0
Federal Transfers		28.1			31.5	��		30.6		31.0			30.3			28.8
Net Income of Government Business Enterprises		5.2			5.5			5.9		6.1			6.0			7.6
Sinking Funds and Other Earnings		1.7			1.8			1.7		1.7			2.3			3.1
		(Dollars)
Dollars Per capita
Total Revenue		10,927			11,042			10,697		10,374			10,589			10,469
Total Expenditure		11,379			11,996			10,938		10,538			10,215			10,002
Debt Servicing Costs		677			650			626		620			689			724
Summary Net Debt		12,877			11,870			10,261		9,687			9,523			8,848
Memorandum Items
Population (000’s) *		1,267.6			1,250.6			1,234.5		1,219.2			1,205.5			1,193.6
GDP at Market Prices ($M)		59,583			56,947			54,275		51,554			51,676			48,902

Source: Manitoba Finance

* official population July 1

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Budget Paper B

SUPPLEMENTARY

FINANCIAL INFORMATION

SUPPLEMENTARY FINANCIAL INFORMATION

CONTENTS

SPECIAL ACCOUNTS	1
Fiscal Stabilization Account	1
Debt Retirement Account	2
Pension Assets Fund	2
CAPITAL INVESTMENT	4
CAPITAL INVESTMENT – CORE GOVERNMENT	5
LOAN REQUIREMENTS	6
BORROWING REQUIREMENTS	8
SUMMARY NET DEBT	9
INTERPROVINCIAL COMPARISONS	10

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¢ SPECIAL ACCOUNTS

Fiscal Stabilization Account

The Fiscal Stabilization Account (FSA) is projected to have a balance of $525 million as at March 31, 2012, after a draw of $25 million for wait-time reduction and other health-related programming, $8 million related to ecoTrust and $124 million to retire a portion of the borrowings and incremental interest costs incurred during the period of recovery to support core government programs.

The budgeted draw in 2012/13 includes $8 million for health-related programming and $4 million for ecoTrust projects, funds prepaid by Canada in previous years, and $184 million to retire a portion of the borrowings ($140 million) and incremental interest costs ($44 million) for core government in 2012/13.

Fiscal Stabilization Account

Revenue, Expenditure and Balance

Projection as at March 31, 2013 and March 31, 2012

	2012/13 Budget			2011/12 Forecast
			(Millions of Dollars)
Total Account Balance, Beginning of Year		525			682
Health Programs
Balance, Beginning of Year		8			33
Transfers to the Core Government
Wait-Time Reduction Programming and Other Health-Related Programming		(8)			(25)
Balance, End of Year		-			8
General Programs
Balance, Beginning of Year		517			649
Transfers to the Core Government
Debt Repayment and Incremental Debt Servicing Costs		(184)			(124)
ecoTrust		(4)			(8)
Balance, End of Year		329			517
Total Account Balance, End of Year		329			525

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Debt Retirement Account

In 2010/11 the entire balance of $145 million of the Debt Retirement Account was utilized to repay general purpose debt as part of Manitoba’s five-year plan.

Pension Assets Fund

The province changed the trust conditions of the funds held in the Pension Asset Fund to clarify that these funds are irrevocably restricted for pension purposes only. Net investment earnings of pension assets include the expected rate of return during the year as well as adjustments to market related value. Market fluctuations of pension assets are not recorded in the year in which they occur, but are recognized over the employee average remaining service life.

The Fund increased as a result of the government’s new investment of $240 million in 2011/12 to continue addressing the province’s unfunded liability for the Civil Service Superannuation Fund. Since 2000, the government has provided $4.0 billion to address the province’s unfunded pension liabilities.

The Fund is expected to have a balance of $3,485 million by the end of the 2012/13 fiscal year.

Pension Assets Fund

Projection as at March 31, 2013 and March 31, 2012

	2012/13 Budget			2011/12 Forecast
			(Millions of Dollars)
Balance, Beginning of Year		3,383			3,174
Contributions and Revenue
New Investment		-			240
Net Investment Earnings		212			84
Departments and Crown Corporations		149			139
		361			463
Transfers
TRAF and CSSF Payments		(259)			(254)
Balance, End of Year		3,485			3,383

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SUMMARY OF ACCOUNT/FUND ACTIVITY

	12/13			11/12			10/11			09/10			08/09			07/08			06/07			05/06			04/05			03/04			02/03			01/02			00/01			99/00
	Budget			Forecast			Actual			Actual			Actual			Actual			Actual			Actual			Actual			Actual			Actual			Actual			Actual			Actual
	(Millions of Dollars)
Fiscal Stabilization Account
Transfers to Account		-			-			-			-			30			128			110			31			405			13			4			63			40			11
Transfers from Account		(196	)		(157	)		(125	)		(57	)		-			-			-			-			-			(171	)		(22	)		(150	)		-			(185	)
Investment Revenue		-			-			-			-			16			27			21			15			2			1			7			14			15			12
Balance, End of Year		329			525			682			807			864			818			663			532			486			79			236			247			320			265
Debt Retirement Account
Contribution		-			-			-			20			110			110			110			110			99			96			96			96			96			75
Interest Earnings		-			-			-			1			1			2			1			-			2			7			3			5			-			-
Transfers to Pension Assets Fund		-			-			-			(10	)		(55	)		(85	)		(85	)		(85	)		(79	)		(75	)		(48	)		(75	)		(21	)		-
Transfers for General Purpose		-			-			(145	)		-			-			-			-			-			(202	)		-			-			-			-			(305	)
Debt Reduction
Balance, End of Year		-			-			-			145			134			78			51			25			-			180			152			101			75			-
Pension Assets Fund
Transfers from Debt Retirement		-			-			-			10			55			85			85			85			79			75			48			75			21
Account
Net Investment Earnings		212			84			100			160			41			16			67			61			31			38			(6	)		2			-
Net Current Service Contributions		(110	)		(115	)		(114	)		(100	)		(80	)		(60	)		10			8			6			3			2			9			-
TRAF/CSSF Funding		-			240			180			330			350			1,502
Balance, End of Year		3,485			3,383			3,174			3,008			2,608			2,242			699			537			383			267			151			107			21

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¢ CAPITAL INVESTMENT

Capital investment continues to be a priority for government, with the cost of these assets amortized over a set period that represents the useful life of the asset as required by GAAP. These set periods result in regular repayment of debt. The end result is increased infrastructure investment for Manitobans, while spreading the cost of those assets over their useful life, a strategy which includes a plan to pay the debt. The net book value of these assets (cost less accumulated amortization) has almost tripled since 1999/2000 and is a major asset of the province in providing services to Manitobans into the future.

The investment in tangible capital assets is projected to be $17.2 billion as of March 31, 2013, with $7.0 billion of related debt having been retired through accumulated amortization. Core government will have a total of $7.2 billion in capital asset investments as of March 31, 2013 and $2.4 billion of related debt will have been retired through accumulated amortization.

Tangible Capital Assets —

Net Book Value

            f - Forecast b - Budgeted

            Source: Manitoba Finance

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¢ CAPITAL INVESTMENT – CORE GOVERNMENT

Provincially owned capital assets such as highways, waterways, buildings, machinery and computer systems are amortized over their useful life based on established guidelines for amortization (see Appendix B of the 2012/13 Estimates of Expenditure). The amortization and interest costs are borne by departments that are responsible for each asset and are reflected as annual costs related to capital assets. In total, costs related to capital assets are estimated at $382 million in 2012/13, an increase of $63 million from 2011/12. In 2012/13, departmental appropriations include $196 million for amortization and $186 million for allocation of interest.

Authority for the annual cost to acquire provincially owned assets is reflected as Part B – Capital Investment which totals $751 million in 2012/13, a decrease of $57 million from 2011/12.

Capital Investment, 2012/13

(Thousands of Dollars)

	2012/13		2011/12
	Budget		Budget*
General Assets
Government Services Capital Projects		128,346		147,336
Transportation Equipment and Aircraft		42,164		76,403
Information Technology Projects
Corporate Information Technology Projects		21,558		23,297
Advanced Education and Literacy		500		1,132
Entrepreneurship, Training and Trade		-		2,829
Family Services and Labour		-		360
Finance		500		-
Health		928		175
Justice		413		300
Other Equipment and Buildings		51,056		14,178
		245,465		266,010
Infrastructure Assets
Provincial Roads, Highways and Airport Infrastructure		432,045		426,133
Water Related Infrastructure		47,800		99,150
Parks, Cottage and Camping Projects		25,600		16,757
		505,445		542,040
Total Capital Investment		750,910		808,050

*The 2011/12 Budget has been restated to be consistent with the 2012/13 Budget presentation.

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¢ LOAN REQUIREMENTS

The Loan Act 2012 provides borrowing and expenditure authority and, in some cases, guarantee authority for the government and its agencies to undertake self-sustaining programs, where self-sustaining means having the ability for repayment. This authority is in addition to that voted in the printed estimates review.

Incremental Capital Authority Requirements for Non-Budgetary Programs, 2012/13

(Thousands of Dollars)

The Loan Act, 2012
The Manitoba Hydro-Electric Board	$	1,490,000
Manitoba Agricultural Services Corporation		225,526
The Manitoba Lotteries Corporation		177,800
Manitoba Housing and Renewal Corporation		167,069
Health Capital Program		125,000
Post-Secondary Institutions		86,005
Manitoba Opportunities Fund Ltd.		38,726
Business Support		28,524
Manitoba Student Aid Program		19,098
Special Operating Agencies Financing Authority - Vehicles and Equipment Management Agency		19,000
The Manitoba Water Services Board		17,590
Diagnostic Services Manitoba		10,012
Northern Affairs Communities		9,659
Cottage Lots Development		6,971
Communities Economic Development Fund		6,800
Special Operating Agencies Financing Authority - The Property Registry		3,600
Co-operative Loans and Loan Guarantee Board		1,500
Special Operating Agencies Financing Authority - Pineland Forest Nursery		156
Manitoba Film Guarantee Program		29
	$	2,433,065

B U D G E T    2 0 1 2    S u p p l e m e n t a r y    F i n a n c i a l    I n f o r m a t i o n    /    B  7

Non-Budgetary Capital Program, 2012/13

(Thousands of Dollars)

The Manitoba Hydro-Electric Board	$	1,312,000
Manitoba Housing and Renewal Corporation		477,026
The Manitoba Lotteries Corporation		241,200
Manitoba Agricultural Services Corporation		226,450
Health Capital Program		197,609
Post-Secondary Institutions		193,264
Manitoba Opportunities Fund Ltd.		58,848
Business Support (including Manitoba Industrial Opportunities Program)		47,400
Special Operating Agencies Financing Authority - Vehicles and Equipment Management Agency		37,086
Manitoba Student Aid Program		36,820
The Manitoba Water Services Board		33,829
Diagnostic Services Manitoba		26,142
Northern Affairs Communities		20,293
Miscellaneous Corporations, Agencies and Other Programs		25,105
	$	2,933,072

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¢ BORROWING REQUIREMENTS

Manitoba’s borrowing requirements in respect of both general and self-sustaining borrowings are estimated to total $3.7 billion in 2012/13, of which $2 billion is required for refinancing purposes. New cash requirements, net of estimated repayments, are $1.7 billion, which includes requirements for general government purposes, capital investments by departments and Manitoba Hydro. Estimated repayments are for general purpose borrowings, capital investment assets and health facilities. The Loan Act, 2012, provides incremental capital authority of $2.4 billion.

Borrowing Requirements 2012/13

(Thousands of Dollars)

	Refinancing		New Cash Requirements		Estimated Repayments		Borrowing Requirements
Government Business Enterprises
Manitoba Hydro		557,000		947,000		-		1,504,000
Manitoba Lotteries Corporation		-		75,000		7,000		68,000
Subtotal		557,000		1,022,000		7,000		1,572,000
Other Borrowings
General Purpose Borrowings		534,037		448,000		521,000		461,037
Capital Investment Assets		583,224		750,910		195,773		1,138,361
Health Facilities		-		180,000		88,499		91,501
Post-Secondary Institutions		-		60,000		-		60,000
Other Crowns and Organizations		273,373		75,000		-		348,373
Subtotal		1,390,634		1,513,910		805,272		2,099,272
Total Borrowing Requirements		1,947,634		2,535,910		812,272		3,671,272

B U D G E T    2 0 1 2    S u p p l e m e n t a r y    F i n a n c i a l    I n f o r m a t i o n    /    B  9

¢ SUMMARY NET DEBT

Changes in Summary Net Debt

(Millions of Dollars)

2011/12 Summary Net Debt (Forecast)	14,844
Net Investment in Tangible Capital Assets
Core Government	555
Other Reporting Entities	464
	1,019
Plus: Projected (Income) Loss for the Year
Core Government	448
Other Reporting Entities	12
	460
Change in Net Debt	1,479
2012/13 Summary Net Debt (Budget)	16,323

In Budget 2012, the net debt to GDP ratio is forecast to be 27.4%. Net debt is an important indicator of a government’s financial position as this highlights the affordability of future government service. Summary net debt represents the difference between the GREs’ total liabilities, such as borrowing and financing, less its financial assets* – it reflects the residual liability that must be financed by future revenues. Net debt may grow in absolute terms from time to time, as needed investments in capital assets are made. These investments underpin and support Manitoba’s economic performance. It is important to measure changes in net debt against the growth of the economy, as measured by the nominal GDP.

* Financial assets are liquid assets such as cash, investments, loans and accounts receivable that could be readily converted to cash.

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¢ INTERPROVINCIAL COMPARISONS

Provincial Expenditure Per Capita Increase, 2006/07 to 2011/12f	Net Debt to GDP Ratio by Province, 2011/12f
f – Forecast         Source: Provincial fiscal documents	f – Forecast         Note: No projection from PE         Source: Provincial fiscal documents
Provincial Government Expenditure on Health, 2010/11f	Major Federal Cash Transfers, Change from 1999/00 to 2012/13
f – Forecast                 Source: Canadian Institute for Health Information	Note: Includes Offshore Accord, Total Transfer               Protection and cumulative best-of payments             Source: Finance Canada

Budget Paper C

TAXATION ADJUSTMENTS

INCLUDES

THE MANITOBA ADVANTAGE

TAXATION ADJUSTMENTS

CONTENTS

SUMMARY OF 2012 TAX MEASURES	1
PERSONAL MEASURES	2
Dividend Tax Credit	2
HEALTH AND ENVIRONMENTAL MEASURES	2
Tobacco Tax	2
Fuel Tax	2
Nutrient Management Tax Credit	3
BUSINESS MEASURES	4
Data Processing Investment Tax Credit	4
Film and Video Production Tax Credit	4
Co-op Education and Apprenticeship Tax Credits	4
Corporation Capital Tax on Financial Institutions	5
SALES TAX MEASURES	6
TECHNICAL AND ADMINISTRATIVE MEASURES	6
CONTACTS FOR FURTHER INFORMATION	7
PERSONAL TAX SAVINGS SINCE 1999	8
MANITOBA INCOME TAX SAVINGS FOR TYPICAL TAXPAYERS	10
MANITOBA INCOME TAX SINCE 1999	11
2012 INTERPROVINCIAL COMPARISON OF TAX RATES	12
FEDERAL AND MANITOBA INCOME TAX RATES, 2012	12
Appendix 1: MANITOBA TAX EXPENDITURES, 2011/12	14
Appendix 2: THE MANITOBA ADVANTAGE	19
Appendix 3: MANITOBA’S COMPETITIVE ENVIRONMENT FOR MANUFACTURING	30
CONCLUSION	34

B U D G E T    2 0 1 2    T a x a t i o n    A d j u s t m e n t s    /    C 1

¢ SUMMARY OF 2012 TAX MEASURES

      A negative amount represents a tax reduction.

	2012/13		Full Year
		(Millions of Dollars)
Ongoing Reductions (1)
Personal Tax reductions		-27.5		-47.0
Business Tax reductions		-6.0		-6.0
		-33.5		-53.0
Personal Measures
Dividend Tax Credit reduced		16.9		13.5
		16.9		13.5
Health and Environmental Measures
Tobacco Tax increased		9.7		10.0
Fuel Tax increased		44.5		48.6
Nutrient Management Tax Credit introduced		-0.1		-0.3
		54.1		58.3
Business Measures
Data Processing Investment Tax Credit introduced		-		-
Film and Video Production Tax Credit enhanced		-		-0.1
Co-op Education and Apprenticeship Tax Credit enhanced		-0.3		-8.0
Corporation Capital Tax on Financial Institutions increased		17.4		11.6
		17.1		3.5
Sales Tax Measures		95.5		106.5
Technical and Administrative Amendments		0.4		0.5
Total Changes, 2012 Budget		184.1		182.3
Total Changes, including Ongoing Tax Reductions		150.6		129.3

1 Tax reductions previously announced that take effect after 2011:

- increased seniors’ Education Property Tax Credit

- increased basic personal amount, spousal amount and eligible dependent amount

- increased take-up in Tuition Fee Income Tax Rebate

- enhanced R&D Tax Credit refundability

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¢ PERSONAL MEASURES

Dividend Tax Credit

(2012/13 revenue impact: +$16.9 million)

The Dividend Tax Credit on eligible dividends paid to shareholders by companies subject to the general corporation income tax rate will be decreased from 11% to 8%, commencing with the 2012 taxation year.

The estimated additional full-year revenue is $13.5 million.

For more information, please contact Location A, page C7.

¢ HEALTH AND ENVIRONMENTAL MEASURES

Tobacco Tax

(2012/13 revenue impact: +$9.7 million)

The Tobacco Tax rate is increased effective midnight, April 17, 2012. The rate per cigarette will increase from 22.5¢ to 25.0¢; the rate on fine-cut tobacco will increase from 21.5¢ to 24.0¢ per gram; and the rate on raw leaf tobacco will increase from 20.0¢ to 22.5¢ per gram.

The estimated additional full-year revenue is $10.0 million.

For more information, please contact Location C, page C7.

Fuel Tax

(2012/13 revenue impact: +$44.5 million)

The fuel tax rate on unmarked gasoline and diesel fuel will increase from 11.5¢ per litre to 14.0¢, effective May 1, 2012. The 11.5¢ rate had been in effect since 1993 for gasoline and since 2004 for diesel fuel.

Marked gasoline will be subject to a 3.0¢ per litre fuel tax rate, effective May 1, 2012. The estimated additional full-year revenue is $48.6 million.

For more information, please contact Location C, page C7.

B U D G E T    2 0 1 2    T a x a t i o n    A d j u s t m e n t s    /    C 3

Nutrient Management Tax Credit

(2012/13 revenue impact: -$0.1 million)

Agricultural producers will be eligible for a new, refundable Nutrient Management Tax Credit. This income tax credit is one component of the Manitoba Government’s strategy to facilitate implementation of amendments to The Environment Act introduced in The Save Lake Winnipeg Act. The credit will be equal to 10% of the capital cost of prescribed nutrient management equipment that is designed to meet water quality requirements. The assets must be acquired and available for use after April 17, 2012 and before 2016.

Capital investments that qualify for the credit are environmentally sound systems installed for use in Manitoba that reduce the risk of nutrient transport to water and help to improve the water quality of Lake Winnipeg. These will include: solid-liquid separation systems, anaerobic digesters, gravity settling tanks, manure treatment systems, and manure composting facilities. Also included are storage tanks suitable for winter manure storage by operators with fewer than 300 animal units.

The costs associated with electrical installations, plumbing, pumps, piping and groundwork required for the installation of the eligible systems are included in the capital cost for purposes of calculating the tax credit. Costs incurred and paid to acquire the system and make it operational are also included, such as engineering, design and installation costs. Borrowing costs are not eligible, and tax creditable capital costs will be net of any government assistance received or receivable on the eligible investment.

Both agribusiness corporations with a permanent establishment in Manitoba, and unincorporated individuals engaged in farming who are residents of Manitoba, are eligible for this support. Where the agricultural operations are owned by a partnership, the total tax credit will be allocated among those partners who reside in Manitoba.

The estimated full-year tax saving for agricultural producers is $0.3 million.

For more information, please contact Location A, page C7.

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¢ BUSINESS MEASURES

Data Processing Investment Tax Credit

(2012/13 revenue impact: not applicable)

In order to position Manitoba as a high technology data processing centre investment location, a refundable corporation income tax credit will be established for property purchased or leased by an eligible corporation after April 17, 2012 for use in Manitoba. The corporation must have a permanent establishment in Manitoba and its primary business activity, including the activities of its affiliates, must be data processing.

The tax credit will be equal to 4% on the capital cost of new qualified property that is a building and 7% on the capital cost of new qualified property that is machinery or equipment. The property must be purchased or leased by the company for use in its data processing centre in Manitoba and be available for use after April 17, 2012 and before 2016. New qualified property that is purchased or leased to replace or improve property that previously qualified for the tax credit will also be eligible for the tax credit.

The tax credit will effectively offset Manitoba sales tax on the qualified property.

For more information, please contact Location A, page C7.

Film and Video Production Tax Credit

(2012/13 revenue impact: negligible)

Companies starting a film or video production after April 17, 2012 will be able to claim accommodation costs incurred and paid up to $250 per night per unit as eligible tangible property expenditures for purposes of calculating the cost-of-production tax credit.

The estimated full-year tax saving for film and video producers is $0.1 million.

For more information, please contact Location A, page C7.

Co-op Education and Apprenticeship Tax Credits

(2012/13 revenue impact: -$0.3 million)

To enhance support for hiring apprentices and journeypersons, particularly early-level apprentices outside Winnipeg, three components of the Co-op Education and Apprenticeship Tax Credits will be enhanced.

• The Early-Level Apprentice Hiring Incentive (currently 10% of wages and salaries up to a maximum of $2,000 per year per apprentice) is enhanced to 15% of wages and salaries up to a maximum of $3,000. This component of the program is also expanded to cover employers eligible for the federal Apprenticeship Job Creation Tax Credit, who will receive a top-up to be treated consistently with other Manitoba tax credit recipients.

• The Advanced-Level Apprentice Hiring Incentive (currently 5% of wages and salaries up to a maximum of $2,500 per level per employee) is doubled to 10% of wages and salaries up to a maximum of $5,000.

• The Journeypersons Hiring Incentive (currently 5% of wages and salaries up to a maximum of $2,500 per year per employee) is also doubled to 10% of wages and salaries up to a maximum of $5,000.

B U D G E T    2 0 1 2    T a x a t i o n    A d j u s t m e n t s    /    C 5

These enhancements are available to employers of apprentices who complete a level after 2012, and employers of journeypersons who become newly certified after 2012. The tax credit is calculated based on wages and salaries paid to qualified employees, net of any support from government or a public authority.

The enhancements are part of a new, more comprehensive government initiative to support apprenticeship, which includes a Rural and Northern Apprenticeship Strategy. Under this strategy, an additional 5% tax credit will be available for employers who hire early-level apprentices who normally reside outside of Winnipeg and who normally report to an employer’s office in rural and northern Manitoba.

	Improvements to Apprenticeship and Journeyperson Tax Credits
	Level 1 and 2 Apprentices	Level 3, 4 & 5 Apprentices	Newly Certified Journeypersons
Current
Tax Credit	10%	5%	5%
Maximum Credit	$2,000	$2,500	$2,500
Budget 2012
Winnipeg
Tax Credit	15%	10%	10%
Maximum Credit	$3,000	$5,000	$5,000
Rural/Northern
Tax Credit	20%	10%	10%
Maximum Credit	$4,000	$5,000	$5,000

All components of the tax credit are fully refundable. Eligible employers include taxable corporations or exempt corporate entities (including not-for-profit agencies, Manitoba Crown entities, municipalities, universities, schools and hospitals). Unincorporated employers may claim the refundable credit on their individual income tax return.

The estimated full-year tax saving to employers from these enhancements is $8.0 million.

For more information, please contact Location B, page C7.

Corporation Capital Tax on Financial Institutions

(2012/13 revenue impact: +$17.4 million)

The 3% Corporation Capital Tax on Financial Institutions is increased to 4%, commencing with taxation years ending after April 17, 2012.

The estimated additional full-year revenue is $11.6 million.

For more information, please contact Location C, page C7.

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n  SALES TAX MEASURES

(2012/13 revenue impact: +$95.5 million)

The following personal services will be taxable, effective July 1, 2012: spa treatments, non-medical skin and nail services (such as pedicures, manicures and facials), hair services (including haircuts, hairstyling, hair removal and augmentation), tattooing and piercing. No sales tax will apply to haircuts costing less than $50.

Sales tax will be applied to prescribed insurance premiums under a contract of insurance, effective July 1, 2012, other than for health, accident or sickness, Autopac, or individual life insurance. This includes property and casualty insurance, group life insurance, trip cancellation insurance, baggage insurance, and land titles insurance. The tax will apply where the insured is a person resident in Manitoba or the premiums are paid in respect of property located in Manitoba.

The estimated additional full-year revenue from these sales tax measures is +$106.5 million.

For more information, please contact Location C, page C7.

n  TECHNICAL AND ADMINISTRATIVE MEASURES

(2012/13 revenue impact: +$0.4 million)

Technical amendments will be made to the Mineral Exploration Tax Credit to ensure it operates as intended, including where credits earned in a higher tax credit year are carried back to a year where lower tax credits were provided.

Now that several residential properties have been designated for tax increment financing, the Community Revitalization Levy paid by residents will be eligible for the Education Property Tax Credit.

To encourage improved tax remittance compliance, the interest rate on tax debts owing under provincially administered taxes and refundable Manitoba personal income tax credits will increase from the prime interest rate plus four percentage points to the prime interest rate plus six percentage points, effective on accounts receivable starting July 1, 2012. The fee for dishonoured taxation payments under provincially administered taxes will be increased from $20 to $25.

The following changes will be made to the Retail Sales Tax.

• To reduce tax administration costs for businesses, the tax return filing frequency will be reduced, allowing 17,000 businesses to file their sales tax returns less often.

• The existing formula regarding the application of sales tax on the taxable use of demonstrator vehicles will be updated.

• The fee for dishonoured taxation payments will be updated to reflect increased costs – an increase of $5.00 per item.

  The Neighbourhoods Alive! Tax Credit will be amended, retroactive to April 12, 2011 when the credit began, as follows:

• allowing a corporation up to four years to achieve the minimum $50,000 donation threshold;

• allowing a corporation to make an up-front donation of up to $200,000 in the first year, and provide in-kind service contributions to earn the maximum credit in each of the subsequent four tax years; and

• limiting in-kind contributions to earn the credit to the first five years of the social enterprise.

Enhanced enforcement measures respecting Tobacco Tax and other taxes will be implemented under The Tax Administration and Miscellaneous Taxes Act.

The estimated additional full-year revenue from these technical and administrative measures is $0.5 million.

For more information, please contact Location A, B or C, page C7.

B U D G E T    2 0 1 2    T a x a t i o n    A d j u s t m e n t s    /    C 7

n  CONTACTS FOR FURTHER INFORMATION

A	Taxation, Economic and	Telephone:	204-945-3757
	Intergovernmental Fiscal Research	Fax:	204-945-5051
	Division, Manitoba Finance	e-mail:	feedbackfin@gov.mb.ca
B	Manitoba Tax Assistance Office,	Telephone:	204-948-2115 in Winnipeg
	Manitoba Finance	Toll-free:	1-800-782-0771
		Fax:	204-948-2263
		e-mail:	tao@gov.mb.ca
C	Taxation Division,	Telephone:	204-945-5603 in Winnipeg
	Manitoba Finance	Toll-free:	1-800-782-0318
		Fax:	204-945-0896
		e-mail:	mbtax@gov.mb.ca

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¢ PERSONAL TAX SAVINGS SINCE 1999

Personal Income Taxes, Education Property Tax Credits, Residential Education Support Levy and

Farmland School Tax Rebate

	2000		2001		2002		2003		2004		2005		2006		2007
	(Millions of Dollars)
Income Tax Reductions
BUDGET
2000		9		68		34
2001				29		7		18
2002						15
2003										39
2005														30
2006														8		34
2007																25
2008
2010
2011
SUBTOTAL		9		97		56		18		39		-		38		59
Property Tax Reductions1
BUDGET
2000		26
2001				27
2002						10
2003								19
2004										23
2005												37
2006														39
2007																42
2008
2009
2011
SUBTOTAL		26		27		10		19		23		37		39		42
Annual Totals		35		124		67		37		62		37		77		101
Cumulative Annual
Totals		35		159		226		262		324		361		438		539

Totals may not add due to rounding.

¹  Reductions include increases to the Education Property Tax Credit of $156 million; the introduction of and increases to the Farmland School Tax Rebate of $35 million; and reductions to the Education Support Levy which was eliminated in 2006 (the elimination of ESL now provides annual tax savings of $145 million compared to $100 million in 2006).

B U D G E T    2 0 1 2    T a x a t i o n    A d j u s t m e n t s    /    C 9

2008	2009		2010		2011		2012		2013		2014		Cumulative Annual Totals
(Millions of Dollars)
														Income Tax Reductions
															BUDGET
														111	2000
														54	2001
														15	2002
														39	2003
														30	2005
														42	2006
51		28		16										120	2007
1		24		11										36	2008
				3		8								11	2010
						24		20		19		19		81	2011
52		52		30		32		20		19		19		539	SUBTOTAL
														Property Tax  Reductions1
															BUDGET
														26	2000
														27	2001
														10	2002
														19	2003
														23	2004
														37	2005
														39	2006
2		2												46	2007
25														25	2008
		16												16	2009
						19		2		2				23	2011
27		18		-		19		2		2		-		291	SUBTOTAL
79		70		30		51		21		21		19		830	Annual Totals
															Cumulative
618		688		718		769		790		811		830			Annual Totals

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¢ MANITOBA INCOME TAX SAVINGS FOR TYPICAL TAXPAYERS

	Tax Payable/(Refunds)				Tax Savings		2012 Savings		Cumulative Savings
Income	1999		2012		in 2012		over 1999		over 13 Years
	(Dollars)						(Percentage)		(Dollars)
SINGLE PERSON1
10,000		88		(95)		183		207.0		1,580
20,000		1,369		1,071		298		21.8		2,588
40,000		4,012		3,289		724		18.0		6,504
70,000		9,153		7,188		1,965		21.5		17,325
100,000		14,572		12,408		2,165		14.9		19,849
FAMILY OF FOUR – ONE EARNER1
25,000		411		(192)		603		146.7		5,468
40,000		2,861		1,684		1,177		41.1		10,048
60,000		6,625		4,405		2,220		33.5		19,831
75,000		9,435		6,835		2,599		27.5		23,087
100,000		13,951		11,428		2,523		18.1		22,224
FAMILY OF FOUR – TWO EARNERS1
30,000		533		(23)		555		104.2		4,527
40,000		1,360		737		623		45.8		5,377
60,000		4,107		3,093		1,015		24.7		9,403
80,000		7,169		5,505		1,664		23.2		15,312
100,000		10,188		8,013		2,176		21.4		19,635
SENIOR COUPLE2
30,000		39		(316)		355		910.4		3,690
40,000		1,667		715		953		57.2		7,377
60,000		5,635		3,342		2,293		40.7		17,425
80,000		8,893		6,387		2,505		28.2		20,442

Note: Some values may differ from previous years’ tables due to changed assumptions regarding pension income splitting and the Personal Tax Credit.

¹  Taxfilers in the single and family examples have earned income and pay Canada Pension Plan and Employment Insurance premiums. In the two-earner family, one taxfiler earns 60% of the income and the other earns 40% and pays child-care fees. The Fitness Tax Credit and the Children’s Arts and Cultural Activity Tax Credit are claimed for one child in both family examples. Where applicable, tax payable has been reduced by the Personal Tax Credit.

²  For the senior couple, both receive the Old Age Security Pension and each spouse splits private pension income in applicable tax years.

Note: Income does not reflect Universal Child Care Benefit entitlements but entitlements have been used to determine year-over-year savings.

B U D G E T    2 0 1 2    T a x a t i o n    A d j u s t m e n t s    /    C 11

¢ MANITOBA INCOME TAX SINCE 1999

One-Earner Family of

Four at $40,000

Source: Manitoba Finance

Two-Earner Family of

Four at $60,000

Source: Manitoba Finance

Single Individual at $70,000

Source: Manitoba Finance

The Basic Personal Amount

Source: Manitoba Finance

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¢ 2012 INTERPROVINCIAL COMPARISON OF TAX RATES

Shows rates applicable on December 31, 2012. Data as of April 1, 2012.

	BC		AB		SK		MB		ON
Personal Income Tax
Top Marginal Rate (%) 1		14.7		10.00		15.00		17.40		17.41
Health Care Premiums ($) 2		1,536								900
Health and Education Tax (%) 3								2.15		1.95
Corporation Income Tax (%)
Small		2.50		3.00		2.00		0.00		4.50
Large		10.00		10.00		12.00		12.00		11.50
Manufacturing		10.00		10.00		10.00		12.00		10.00
Small business threshold ($000)		500		500		500		400		500
Capital Tax (%)
Banks		-		-		3.25		4.00		-
Small Financial Institutions 4		-		-		0.70		-		-
Sales Tax (%)		7.0		-		5.0		7.0		8.0
Gasoline Tax (¢/l) 5		21.67		9.0		15.0		14.0		14.7
Diesel Fuel Tax (¢/l) 6		22.67		9.0		15.0		14.0		14.3
Tobacco Tax (¢/cigarette) 7		18.50		20.00		21.00		25.00		12.35
Corporation Income Tax Credits
Manufacturing (%)						5.00		10.00
Research and Development (%)		10.00		10.00		15.00		20.00		14.50

1 Top marginal provincial rates include surtaxes.

2 The premium for BC is the maximum family rate. ON calculates premiums based on taxable income: for incomes of $20,000 or less the premium is zero and the maximum premium of $900 is reached at an income of $200,600. QC calculates premiums for the Prescription Drug Plan on net income: maximum $600 for a single person and $1,200 for a family, and the Parental Insurance Plan Premiums on insurable earnings of up to $66,000; maximum $369. The QC Health Contribution Fund is income tested; maximum per adult is $200.

3 MB exempts firms with payrolls of less than $1.25 million and a graduated rate for firms with payroll up to $2.5 million. ON provides a payroll deduction of $400,000 for all employers. QC has graduated rates for firms with payrolls under $5 million. NL exempts firms with payrolls of less than $1 million.

4 MB exempts small financial institutions with less than $4 billion in taxable paid-up capital. SK has a reduced tax rate for small financial institutions with less than $1.5 billion in taxable paid-up capital.

¢ FEDERAL AND MANITOBA INCOME TAX RATES, 2012

Personal Income Tax Rates

Federal Rate	Taxable Income Range	Manitoba Rate	Taxable Income Range
15.0%	$0 – $42,707	10.8%	$0 – $31,000
22.0%	$42,707 – $85,414	12.75%	$31,001 – $67,000
26.0%	$85,414 – $132,406	17.4%	over $67,000
29.0%	over $132,406

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QC	NB	NS	PE	NL
					Personal Income Tax
19.22	14.30	21.00	18.37	13.30	Top Marginal Rate (%) 1
1,400					Health Care Premiums ($) 2
4.26				2.00	Health and Education Tax (%) 3
					Corporation Income Tax (%)
8.00	4.50	4.00	1.00	4.00	Small
11.90	10.00	16.00	16.00	14.00	Large
11.90	10.00	16.00	16.00	5.00	Manufacturing
500	500	400	500	500	Small business threshold ($000)
					Capital Tax (%)
0.25	4.00	4.00	5.00	4.00	Banks
-	-	-	-	-	Small Financial Institutions 4
9.5	8.0	10.0	10.0	8.0	Sales Tax (%)
18.2	13.6	15.5	15.8	16.5	Gasoline Tax (¢/l) 5
19.2	19.2	15.4	20.2	16.5	Diesel Fuel Tax (¢/l) 6
10.90	17.00	21.52	25.40	19.00	Tobacco Tax (¢/cigarette) 7
					Corporation Income Tax Credits
5.00			10.00		Manufacturing (%)
37.50	15.00	15.00	-	15.00	Research and Development (%)

⁵  Provincial gasoline taxes are fixed rates per litre. PE includes both a variable (maximum of 8.7¢/l) and a fixed (7.1¢/l) tax. The rate in BC includes 6.75¢/l dedicated to the BC Transportation Financing Authority and the carbon tax rate of 6.67¢/l for gasoline. ON, QC, NB, NS and NL apply provincial sales tax.

⁶  Provincial diesel fuel taxes are fixed rates per litre. PE includes both a variable (maximum of 8.7¢/l) and a fixed (11.5¢/l) tax. The rate in BC includes 6.75¢/l dedicated to the BC Transportation Financing Authority and the carbon tax rate of 7.67¢/l for diesel. Montréal has an additional levy of 3.0¢/l and QC imposes a carbon tax of 0.8¢/l on petroleum companies (which, it is assumed, is passed on to consumers). ON, QC, NB, NS and NL include provincial sales tax based on average pump prices.

⁷  Provincial sales tax applies to tobacco products in all provinces except AB, PE and QC.

Corporation Income Tax Rates

	Federal		Manitoba
Basic Rate		15.0%		12.0%
Small Business Rate		11.0%		0.0%
Small Business Threshold	$	500,000	$	400,000

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¢  Appendix 1:

      MANITOBA TAX EXPENDITURES, 2011/12

Introduction

Governments use the tax system to pursue social, cultural and economic objectives. A tax expenditure is measured as a deviation from a benchmark tax base. The expenditure can be in the form of a deduction, credit, preferential rate, deferral or exemption. Tax expenditures may target taxpayers (ex: individuals, corporations); activities (ex: farming, film production, manufacturing); property (ex: machinery, equipment); sources of income (ex: pensions); transactions (ex: RRSP contributions); or events (ex: involuntary dispositions).

Accounting for Tax Expenditures

Certain tax expenditures are treated as departmental expenditures, which are subject to review and approval by the Legislature, and are published annually as an individual line item in the Estimates of Expenditure in public accounts.

Other tax expenditures are absorbed into revenue estimates, reducing government revenues that would otherwise have been available for various direct expenditures. Tax expenditure accounts help to enhance the transparency of program expenditures and promote public accountability for tax credits that are absorbed into tax revenue.

Limitations of Tax Expenditure Accounting

Tax expenditure accounting has important limitations that must be considered when interpreting results. The value of each tax expenditure is estimated individually. Interactions between provisions are not taken into account. This has two effects. First, estimates for two or more tax expenditures cannot be added together to arrive at a combined value. Second, changing any one tax expenditure might affect the value of another tax expenditure. For example, changing something that is a deduction from income, such as RRSP contributions, would change reported net income. This in turn would change the value of tax credits, such as Manitoba’s Personal Tax Credit, that depend on net income. The combined value of the tax expenditures listed in the account is substantially less than the sum of the individual items.

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Reporting Tax Expenditures

Manitoba’s tax expenditure accounts are separated into six sections: personal income tax, corporation income tax, health and education tax levy, retail sales tax, fuel tax and corporation capital tax. The estimates are calculated from tax assessment data provided by the Canada Revenue Agency and departmental data. The estimates provided are for the 2011/12 fiscal year and include measures announced in the 2012 Budget.

In the fall of 2011, the Public Sector Accounting Board (PSAB) issued guidelines on transfers made through the tax system that have an impact on revenue or expenditure, but no net fiscal impact. The guidelines took effect April 1, 2012. The PSAB guidelines stipulate that tax expenditures that provide a financial benefit through the tax system for a purpose other than the relief of taxes be shown as an expense.

The 2012 Budget reflects the following tax credits as expenditures and can be found in the Estimates of Expenditure in the departments of Agriculture, Food and Rural Initiatives, Education, and Finance. The 2011/12 Estimates have also been restated to conform with the new guidelines.

CREDITS ACCOUNTED FOR AS EXPENDITURE ITEMS

	2011/12
	(Millions of dollars)
Education Property Tax Credit (including the Advance)		287.3
Farmland School Tax Rebate		35.5
Film and Video Production Tax Credit		15.0
Tuition Fee Income Tax Rebate Advance		7.9
School Tax Credit for Tenants and Homeowners (55+)		1.5
Book Publishing Tax Credit		0.4
Co-operative Development Tax Credit		0.2
Interactive Digital Media Tax Credit		0.1
Cultural Industries Printing Tax Credit		0.1
TOTAL		348.0

The PSAB guidelines also define tax concessions as financial benefits that provide tax relief for taxes previously paid or currently owing and directs that they be netted against the related tax revenue. The 2011/12 Estimates have been restated to conform with the new guideline. The following tax concessions have been netted against revenue:

• Personal Tax Credit

• Political Contribution Tax Credit (for individuals only)

• Community Enterprise Development Tax Credit

• Riparian Tax Credit

Revenue forecasts for 2011/12 have also been restated to reflect this new accounting standard.

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MANITOBA TAX EXPENDITURES, 2011/12

	(Millions of Dollars)
PERSONAL INCOME TAX
(a)      Adjustments to Income (in accordance with tax collection agreements)
Contributions to RRSPs		144.0
Contributions to RPPs		89.6
Capital gains inclusion rate		76.5
Lifetime capital gains exemption		35.4
Social assistance, WCB and OAS/GIS (non-taxable income)		21.2
Union dues and professional fees		18.6
Child-care expenses		13.2
Northern residents deduction		6.8
Pension income splitting		17.1
Moving expenses		1.9
(b)      Non-refundable tax credits (basic credits provided federally and by all provinces)
Basic personal		653.6
CPP/EI		115.0
Charitable donations		67.0
Age		33.5
Tuition fees and education amount ($400/month)		30.0
Medical expenses		33.4
Spousal		23.8
Eligible dependant		16.8
Private pension		15.1
Disability		19.1
Caregiver		1.4
Student loan interest		0.8
Fitness Tax Credit		3.9
Children’s Arts and Cultural Activity Tax Credit		3.8
Infirm dependants		0.2
Adoption Expenses Tax Credit		0.1
Family Tax Benefit		58.1
(c)      Other Manitoba Tax Measures
Tuition Fee Income Tax Rebate		26.3
Labour-sponsored Venture Capital Corporations Tax Credit		0.3
Mineral Exploration Tax Credit		3.4
Overseas Employment Tax Credit		0.5
Foreign Tax Credit		2.9
Primary Caregiver Tax Credit		9.6
Political Contributions Tax Credit		1.6
Community Enterprise Development Tax Credit		0.1

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	(Millions of Dollars)
CORPORATION INCOME TAX
Low rate for small business		237.5
Manufacturing Investment Tax Credit		34.2
Research and Development Tax Credit		29.7
Green Energy Equipment Tax Credit		0.6
Co-op Education and Apprenticeship Tax Credits		0.9
Odour Control Tax Credit		0.1
Riparian Tax Credit		0.1
Small Business Venture Capital Tax Credit		0.4
Neighbourhoods Alive! Tax Credit		0.1
Nutrient Management Tax Credit		0.1
HEALTH AND EDUCATION LEVY
$1.25 million exemption		138.3
Exemption for interjurisdictional common carriers		14.0
RETAIL SALES TAX
Personal Tax Credit		39.8
Exemptions
Groceries		167.3
Farm machinery and repairs		45.5
Farm and organic fertilizer		23.3
Prescription drugs and medicine		22.8
Books, free magazines and newspapers, and school yearbooks		18.7
Farm pesticides and herbicides		17.0
Medical supplies, appliances and equipment		15.0
Water supplied by a municipality		12.9
Natural gas for residential heating		9.8
Children’s clothing and footwear		11.7
Electricity used for manufacturing or mining		11.8
Custom software and computer programming		7.8
Electricity for residential heating		7.1
Vehicle trade-ins		6.5
Toll-free calls		6.1
Vehicle private buy/sell refunds		3.9
Direct agents and qualifying items used in manufacturing a product for sale and in mining or   processing minerals		3.2
Municipal exemptions (including the purchase of ambulances, fire trucks and related equipment,flood protection and gravel or sand purchased by a municipality for its own use)		1.8
Qualifying geophysical survey and explorations equipment, drill rigs and well-servicing equipment used in oil and gas exploration and development		1.6

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	(Millions of Dollars)
Feminine hygiene products		1.3
Mobile, ready-to-move and modular homes (point of sale reduction)		0.9
Films for public broadcast		0.4
Non-prescription smoking cessation products		0.4
Farm manure slurry tanks and lagoon liners		0.1
Qualifying geophysical survey and exploration equipment, and prototype mining equipment		0.1
FUEL TAX
Marked gasoline and diesel		43.7
Ethanol grant		19.5
International cargo flight refunds		0.1
CORPORATION CAPITAL TAX
Elimination of General Corporation Capital Tax		127.4
Capital deduction		0.2
Credit unions and caisses populaires exemption		12.5
Co-operatives exemption		0.7
Small banks and trust and loan corporations exemptions		0.8

All estimates are based on the most complete information available at the time of publication.

In some cases, new information may significantly revise earlier estimates.

Source: Manitoba Finance

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n Appendix 2:

    THE MANITOBA ADVANTAGE

Manitoba is a diversified economy where no single industry dominates the industrial base. Manitoba has been quick to adjust to the changing global market conditions. With emerging markets increasingly driving global growth, Manitoba has expanded its sales to Asia, the Middle East and Africa.

Diversity has provided Manitoba with balance, stability and measured growth over the long term. It has helped generate the best record for consistent growth in capital investment of all provinces, and supported the largest increase in population in 40years.

Manitoba provides businesses and residents with a unique set of benefits that we call “The Manitoba Advantage:”

• a productive, well-educated and multilingual labour force that consistently generates among the lowest unemployment rate and the highest overall labour force participation rate in Canada;

• a favourable business cost environment, including competitive office and land costs, reasonable construction costs and affordable taxes;

• a supportive capital investment information network for new and expanding business includes Manitoba Business Gateways, Yes! Winnipeg and CentrePort Canada, among others;

• an extensive network of R&D facilities and communication infrastructure supporting innovation and productivity;

• a convenient mid-continent location with cost-effective transportation links and intermodal facilities providing shipping by road, rail, air and sea, enhanced by CentrePort Canada, the country’s first foreign trade zone and inland port;

• a favourable cost of living, including among the lowest electricity costs in North America; reliable and accessible public services, including quality universal public health care and education;

• a dynamic cultural and artistic community with a strong background of caring, high level of charitable giving and volunteering; and an attractive natural environment with plenty of opportunities for recreation and relaxation which further enhance Manitobans’ quality of life.

To show Manitoba’s cost competitiveness in more detail, several analyses are provided. The interprovincial comparison of annual personal costs and taxes, net of credits and rebates, compares provinces’ living costs and tax levels for a variety of family types (see p. C22) and graduate students (see p. C26).

Manitoba’s Competitive Environment for Manufacturing, provides a detailed comparison of the taxes and costs faced by representative manufacturers in various Canadian and U.S. cities (see p. C30).

Since 1999, Manitoba’s overall provincial rankings for personal costs and taxes have been among the best in Canada. For 2012, Manitoba’s performance remains favourable. Interprovincial comparison of provincial taxes, utilities and housing costs for five representative family types continues to leave Manitoba ranking in the top three most affordable provinces in which to live and work.

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2012 Comparison of Personal Costs and Taxes

Single Person Earning $30,000	Single Parent Earning $30,000
Two-Earner Family of Four Earning $60,000	Two-Earner Family of Five Earning $75,000

All Charts Source: Manitoba Finance

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2012 Comparison of

Personal Costs and Taxes

Single Person: $30,000	BC		AB		SK		MB		ON
Provincial Income Tax		833		1,086		1,245		1,407		427
Health Premiums		768		0		0		0		300
Subtotal PIT and Premiums		1,601		1,086		1,245		1,407		727
Provincial Sales Tax		326		0		139		288		491
Carbon Tax Credit		(116)		0		0		0		0
Total Provincial Taxes, Credits and Premiums		1,811		1,086		1,383		1,695		1,218
Rent		11,568		10,788		9,444		8,136		11,724
Utilities		316		652		606		341		629
Public Transit		923		1,015		801		824		1,436
Total Living Costs		12,807		12,455		10,851		9,301		13,789
Total Personal Costs and Taxes		14,618		13,541		12,234		10,996		15,007

Single Parent, One Child: $30,000	BC		AB		SK		MB		ON
Provincial Income Tax		(154)		0		(446)		(70)		(809)
Health Premiums		835		0		0		0		300
Subtotal PIT and Premiums		681		0		(446)		(70)		(509)
Family/Employment Tax Credits		0		(715)		0		0		0
Child Benefits		0		0		0		0		(210)
Provincial Sales Tax		423		0		180		374		639
Carbon Tax Credit		(231)		0		0		0		0
Total Provincial Taxes, Credits and Premiums		873		(715)		(266)		305		(80)
Rent		11,568		10,788		9,444		8,136		11,724
Child Care		1,200		1,524		3,396		3,358		1,000
Utilities		316		652		606		341		629
Public Transit		923		1,015		801		824		1,436
Total Living Costs		14,007		13,979		14,247		12,659		14,789
Total Personal Costs and Taxes		14,880		13,264		13,981		12,964		14,708

Sums may not add due to rounding.

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QC		NB		NS		PE		NL		Single Person: $30,000
	1,145		1,602		1,508		2,002		1,532	Provincial Income Tax
	949		0		0		0		0	Health Premiums
	2,094		1,602		1,508		2,002		1,532	Subtotal PIT and Premiums
	511		472		631		378		519	Provincial Sales Tax
	0		0		0		0		0	Carbon Tax Credit
	2,605		2,074		2,139		2,380		2,051	Total Provincial Taxes, Credits and Premiums
	7,692		7,644		9,036		7,224		7,992	Rent
	326		508		637		723		554	Utilities
	698		709		766		649		775	Public Transit
	8,716		8,861		10,439		8,596		9,321	Total Living Costs
	11,321		10,935		12,578		10,977		11,373	Total Personal Costs and Taxes

QC		NB		NS		PE		NL		Single Parent, One Child: $30,000
	1,171		44		497		1,039		0	Provincial Income Tax
	620		0		0		0		0	Health Premiums
	1,791		44		497		1,039		0	Subtotal PIT and Premiums
	(551)		(250)		0		0		0	Family/Employment Tax Credits
	(3,056)		(67)		0		0		0	Child Benefits
	664		613		820		491		674	Provincial Sales Tax
	0		0		0		0		0	Carbon Tax Credit
	(1,152)		340		1,317		1,531		674	Total Provincial Taxes, Credits and Premiums
	7,692		7,644		9,036		7,224		7,992	Rent
	1,820		2,686		3,531		4,104		4,860	Child Care
	326		508		637		723		554	Utilities
	698		709		766		649		775	Public Transit
	10,536		11,547		13,970		12,700		14,181	Total Living Costs
	9,385		11,887		15,287		14,231		14,856	Total Personal Costs and Taxes

Sums may not add due to rounding.

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2012 Comparison of

Personal Costs and Taxes

Two-Earner Family of 4: $60,000	BC		AB		SK		MB		ON
Provincial Income Tax		1,132		1,645		483		3,046		679
Health Premiums		1,536		0		0		0		300
Subtotal PIT and Premiums		2,668		1,645		483		3,046		979
Family/Employment Tax Credits		0		(1,365)		0		0		0
Child Benefits		0		0		0		0		0
Property Taxes		3,291		2,114		2,684		2,728		2,999
Property Tax Credits		(570)		0		0		(700)		0
Provincial Sales Tax		1,103		0		695		1,106		1,824
Gasoline Tax		650		270		450		420		441
Carbon Tax Credit		(72)		0		0		0		0
Total Provincial Taxes, Credits and Premiums		7,071		2,664		4,312		6,600		6,243
Mortgage Costs		23,471		11,807		9,837		8,267		13,231
Child Care		14,880		8,868		11,352		9,776		7,999
Utilities		1,661		2,024		1,972		1,599		2,065
Auto Insurance		2,719		2,664		1,949		1,885		8,666
Total Living Costs		42,731		25,363		25,110		21,527		31,961
Total Personal Costs and Taxes		49,802		28,027		29,422		28,172		38,204

Two-Earner Family of 5: $75,000	BC		AB		SK		MB		ON
Provincial Income Tax		1,768		2,484		1,297		4,142		1,445
Health Premiums		1,536		0		0		0		516
Subtotal PIT and Premiums		3,304		2,484		1,297		4,142		1,961
Family/Employment Tax Credits		0		(1,755)		0		0		0
Child Benefits		0		0		0		0		0
Property Taxes		3,655		2,950		3,671		3,596		5,151
Property Tax Credits		(570)		0		0		(700)		0
Provincial Sales Tax		1,387		0		565		1,301		2,308
Gasoline Tax		650		270		450		420		441
						��
Total Provincial Taxes, Credits and Premiums		8,426		3,949		5,983		8,759		9,861
Mortgage Costs		26,610		16,479		13,455		11,804		22,723
Child Care		23,400		14,940		15,678		14,495		12,500
Home Heating		2,768		3,373		3,286		2,665		3,442
Auto Insurance		2,719		2,664		1,949		1,885		8,666
Total Living Costs		55,497		37,456		34,368		30,849		47,331
Total Personal Costs and Taxes		63,923		41,405		40,351		39,608		57,192

Sums may not add due to rounding.

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QC		NB		NS		PE		NL		Two-Earner Family of 4: $60,000
	4,589		2,335		2,620		2,989		2,390	Provincial Income Tax
	1,698		0		0		0		0	Health Premiums
	6,288		2,335		2,620		2,989		2,390	Subtotal PIT and Premiums
	0		(250)		0		0		0	Family/Employment Tax Credits
	(2,698)		0		0		0		0	Child Benefits
	3,083		2,790		2,332		2,600		1,545	Property Taxes
	0		0		0		0		0	Property Tax Credits
	1,979		1,751		2,274		1,263		1,923	Provincial Sales Tax
	546		408		465		495		474	Gasoline Tax
	0		0		0		0		0	Carbon Tax Credit
	9,198		7,034		7,691		7,347		6,333	Total Provincial Taxes, Credits and Premiums
	8,280		6,010		7,744		6,010		7,694	Mortgage Costs
	3,640		12,802		14,217		12,000		15,120	Child Care
	2,149		2,879		2,704		3,974		3,641	Utilities
	1,988		2,022		2,069		1,733		2,839	Auto Insurance
	16,057		23,713		26,734		23,717		29,294	Total Living Costs
	25,255		30,747		34,425		31,064		35,627	Total Personal Costs and Taxes

QC		NB		NS		PE		NL		Two-Earner Family of 5: $75,000
	7,028		3,503		3,906		4,131		3,429	Provincial Income Tax
	1,782		0		0		0		0	Health Premiums
	8,810		3,503		3,906		4,131		3,429	Subtotal PIT and Premiums
	0		(250)		0		0		0	Family/Employment Tax Credits
	(3,200)		0		0		0		0	Child Benefits
	5,152		3,859		3,196		3,299		2,306	Property Taxes
	0		0		0		0		0	Property Tax Credits
	2,396		2,204		2,781		1,367		2,232	Provincial Sales Tax
	546		408		465		495		474	Gasoline Tax
	13,704		9,724		10,348		9,293		8,441	Total Provincial Taxes, Credits and Premiums
	13,836		8,312		10,614		7,624		11,481	Mortgage Costs
	5,460		19,203		21,793		18,000		22,680	Child Care
	3,582		4,798		4,507		6,623		6,068	Home Heating
	1,988		2,022		2,069		1,733		2,839	Auto Insurance
	24,866		34,335		38,983		33,980		43,068	Total Living Costs
	38,570		44,059		49,331		43,273		51,509	Total Personal Costs and Taxes

Sums may not add due to rounding.

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2012 Comparison of Personal Costs and Taxes

Net of Graduate Credits and Tuition Rebates

Single Person: $50,000	BC		AB		SK		MB		ON
Provincial Income Tax		2,139		2,958		3,669		4,499		2,342
Graduate Tuition Credit/Rebate		0		0		(2,000)		(2,500)		0
Health Premiums		768		0		0		0		600
Subtotal PIT, Credit and Premiums		2,907		2,958		1,669		1,999		2,942
Property Taxes		3,291		2,114		2,684		2,728		2,999
Property Tax Credits		(570)		0		0		(700)		0
Provincial Sales Tax		479		0		260		470		777
Gasoline Tax		433		180		300		280		294
Total Provincial Taxes, Credits and Premiums		6,541		5,252		4,913		4,776		7,012
Mortgage Costs		23,471		11,807		9,837		8,267		13,231
Utilities		1,661		2,024		1,972		1,599		2,065
Auto Insurance		1,286		1,233		877		893		4,268
Total Living Costs		26,418		15,064		12,686		10,759		19,564
Total Personal Costs and Taxes		32,959		20,316		17,599		15,535		26,576

Sums may not add due to rounding.

Income Tax and Health Premiums, Net of Graduate Credits and Tuition Rebates	Personal Costs and Taxes - Graduate Earning $50,000
Source: Manitoba Finance	Source: Manitoba Finance

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QC		NB		NS		PE		NL		Single Person: $50,000
	5,051		3,781		4,631		4,557		3,795	Provincial Income Tax
	0		(3,781)		(2,500)		0		0	Graduate Tuition Credit/Rebate
	1,061		0		0		0		0	Health Premiums
	6,112		0		2,131		4,557		3,795	Subtotal PIT, Credit and Premiums
	3,083		2,790		2,332		2,600		1,545	Property Taxes
	0		0		0		0		0	Property Tax Credits
	852		741		978		558		818	Provincial Sales Tax
	364		272		310		330		316	Gasoline Tax
	10,411		3,803		5,751		8,045		6,474	Total Provincial Taxes, Credits and Premiums
	8,280		6,010		7,744		6,010		7,694	Mortgage Costs
	2,149		2,879		2,704		3,974		3,641	Utilities
	816		942		983		813		1,377	Auto Insurance
	11,245		9,831		11,431		10,797		12,712	Total Living Costs
	21,656		13,634		17,182		18,842		19,186	Total Personal Costs and Taxes

Sums may not add due to rounding.

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NOTES

Provincial taxes, credits and premiums are based on information available prior to April 1, 2012, (except for Manitoba, which includes Budget 2012 changes) for the following major urban centres in each province: Vancouver, Calgary, Saskatoon, Winnipeg, Toronto, Montréal, Saint John, Halifax, Charlottetown and St. John’s.

Auto insurance coverage includes $2 million Third Party Liability, a $500 All Perils Deductible, accident benefits and $2 million Standard Policy Form #44 family protection coverage for those jurisdictions without no-fault injury coverage, and La Societé de l’Assurance Automobile du Québec injury protection in Montréal. Rates were provided by the Insurance Corporation of British Columbia for British Columbia, SGI Canada for Saskatchewan, and Manitoba Public Insurance (MPI) for Manitoba. Rates for other cities are the average of the quotes from 10 private insurers providing coverage in those provinces. Discounts for second or multiple vehicles, where available, are not included in the auto insurance calculations. Rebates issued by MPI or other insurers are also excluded. Auto insurance for the 2010 Dodge Grand Caravan SE and the 2003 Chevrolet Malibu are used in these examples, two of the more common vehicles driven in Manitoba.

Child-care costs are based on annual parent fees paid, less subsidies, for preschool aged children, typically over two years of age and under six years of age, for 260 days or 12 months per year. Manitoba and Quebec are the only provinces with regulated maximum parent fees. Fees for other provinces are those obtained from provincial offices, online and/or in a survey conducted in the first quarter of 2011.

Gasoline Tax is based on the annual consumption of 3,000 litres. The Gasoline Tax includes all provincial levies on gas, including carbon tax and sales tax where applicable.

Health premiums are annual premiums for hospital insurance and medical services in provinces which levy them. Quebec’s Prescription Drug Plan, Parental Insurance Plan and health contribution are included.

Mortgage costs are based on average home prices for a detached bungalow for the family with $60,000 of income and for the graduate with $50,000 of income, and on an executive detached two-storey for a family with $75,000 of income, from the “Royal LePage Fourth Quarter 2011 Survey of Canadian House Prices,” with one-half of the home price being financed over 25 years at a one-year closed mortgage rate of 3.48%.

Net child benefits represent provincial programs comparable to the Canada Child Tax Benefit for families with children. Provincial child benefit measures are available in British Columbia (Family Bonus and the Earned Income Benefit), Alberta (Family Employment Tax Credit), Manitoba (Child Benefit), Ontario (Trillium Benefit), Quebec (Child Assistance Payments), New Brunswick (Child Tax Benefit and the Working Income Supplement), Nova Scotia (Child Benefit), and Newfoundland and Labrador (Child Benefit).

Property taxes for the family with $60,000 and the graduate with $50,000 of income are based on the estimated taxes for a sample detached bungalow from the City of Edmonton “2010 Residential Property Taxes and Utility Charges Survey” with the exception of Charlottetown whose property tax estimate is based on the Saskatchewan 2012 Budget Paper “2012 Intercity Comparison of Taxes, Utilities and Housing.” Property taxes for the detached bungalow have been proportionally adjusted for a family with $75,000 of income to reflect the taxes paid for an executive detached two storey.

Provincial income tax is calculated for a single renter with $30,000 earned income, a single parent with one preschool child who rents and has $30,000 in earned income, and the two family profiles with $60,000 and $75,000 of earned income, respectively. These incomes are before receipt of the Universal Child Care Benefit (UCCB), but the UCCB is used in the calculation of income tax. For the single parent, UCCB is treated as taxable income of the dependant child. Family profiles include two income earners (one spouse earns 60% of the family income while the other spouse earns 40%) and two preschool

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children; or three preschool children. Personal non-refundable credits used include the CPP/QPP and EI contribution credits. For the single parent, child-care costs less subsidies for each province have been deducted from income. For two-earner families, eligible child-care costs have been deducted from the income of the spouse with the lower income. Gross Quebec personal income tax has been reduced by the 16.5% abatement for federal income tax. Refundable sales tax credits and provincial tax reductions and rebates have been deducted from income tax payable. Property tax credits for renters are included in income tax, but property tax credits for homeowners are shown separately.

Rent is from Canada Mortgage and Housing Corporation’s Rental Market Survey, October 2011, and is based on the average one-bedroom apartment rent for each urban centre.

Provincial sales tax is based upon an average expenditure basket at the total income levels from the “2009 Survey of Household Spending” (Statistics Canada), inflated to 2012 values using each province’s Consumer Price Index.

Transit fares are based on adult monthly pass rates in effect in January 2012. The impact of the federal non-refundable public transit tax credit has reduced the cost of transit fees shown for the single individual and single parent with one child examples.

Utilities are based on the Saskatchewan 2012 Budget Paper “2012 Intercity Comparison of Taxes, Utilities and Housing.”

• Home heating charges are based on an annual consumption level of 2,800 cubic metres of natural gas for a detached bungalow for the family with $60,000 of income and the graduate with $50,000 of income. Annual consumption for the detached bungalow has been proportionally adjusted for the executive detached two storey. For the Atlantic provinces, the figures represent the BTU equivalent consumption of fuel oil.

• Electricity charges are based on the annual consumption of 8,100 kWh for a detached bungalow for the family with $60,000 of income and the graduate with $50,000 of income and 13,500 kWh for the family at $75,000. Annual consumption of 4,500 kWh is used for the single person and single-parent renters. Rates do not include municipal taxes.

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n APPENDIX 3:

MANITOBA’S COMPETITIVE ENVIRONMENT FOR MANUFACTURING

Competitive operating costs and taxes have made Manitoba one of the least expensive provinces in Canada to do business. Among representative North American cities, both smaller and larger manufacturers in Brandon and Winnipeg rank at or near the best on start-up costs, net income, overall taxes and return on investment. Manitoba’s competitive business environment continues to position Manitoba as an ideal manufacturing location due to:

• its central location and excellent transportation links to the rest of North America, including CentrePort Canada

• low industrial and commercial land costs

• electricity costs which are among the lowest in the world

• a skilled, well-educated and affordable work force

• one of the best R&D tax credit regimes

• low taxes on capital investments.

Manitoba Finance’s competitiveness model compares the tax structure and cost environment for representative smaller and larger manufacturing firms relative to several other North American cities. The model simulates start-up, operating, financial and taxation costs over a period of 20 years. It incorporates future unconditional changes in taxes that have been announced by the federal, provincial, state or local governments. The representative firms’ profiles have been updated using the most recent data available from Statistics Canada, local economic development boards and other public sources.

Payroll-Related Taxes and Levies per Employee, Larger Manufacturing Firm Winnipeg and Atlanta, 2012     Source: Manitoba Finance

Payroll-related Levies U.S. employers pay federal and state unemployment taxes, social security tax and medicare tax and are also required to provide workers’ compensation coverage. Canadian employers do not pay provincial unemployment or federal medicare taxes, though some provinces have taxes on payroll. For example, at the same wage level, a firm in Atlanta will have higher payroll-related taxes and levies than in Winnipeg. Interjurisdictional Competitiveness The following indicators are used to assess cost and tax competitiveness for both a smaller and a larger manufacturing firm: •       net cost of investment, or start-up costs (including applicable taxes) •       pre-tax net income •       effective tax rates •      internal rates of return.

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The model uses actual costs for each city and calculates net revenue and cash flow, including start-up costs, based on the operating costs in each location.1 The results for each city are compared to the overall average of all cities (100.0) for each of the indicators and presented in the charts that follow.

Net Cost of Investment

The costs of starting a manufacturing plant (land, buildings, and machinery and equipment) in Manitoba cities are among the lowest of all cities. Investment tax credits on capital asset purchases reduce the net cost of investment. Start-up costs in larger cities tend to be higher due to the cost of land and construction labour wages and salaries.

Pre-Tax Net Income

Net Cost of Investment Smaller Manufacturing Firm	Net Cost of Investment Larger Manufacturing Firm
Source: Manitoba Finance	Source: Manitoba Finance

Pre-tax net income compares Manitoba’s business cost competitiveness to other jurisdictions. It is calculated by deducting production material costs and location-specific costs from fixed annual sales figures. Annual sales are uniform for all locations and are ramped up through epsthe first four years of operation then fixed across the cities at $4 million for the smaller firm and $45 million for March the 30, larger 2012 firm for years five to twenty. Annual production material costs are equal to 46% of sales in a given year.

The following location-specific costs are also deducted from sales:

• average manufacturing wages

• local utility costs for electricity

• interest charges on debt used to finance construction of the manufacturing plants

1 For comparison purposes, U.S. data is converted to Canadian dollars at an exchange rate of C$0.9919 (March 16, 2012 rate).

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• depreciation of capital assets: buildings costs (which vary by city based on local construction wages) and machinery and equipment (which are assumed to be the same across all cities)

• employer-paid health premiums.

Brandon yields the highest pre-tax net income for both the smaller and larger manufacturing firms, while Winnipeg has the sixth-highest pre-tax net income for both model firms, which is still above the overall average for all cities.

Pre-Tax Net Income Smaller Manufacturing Firm	Pre-Tax Net Income Larger Manufacturing Firm
Source: Manitoba Finance	Source: Manitoba Finance

Effective Tax Rates

Effective tax rates are generated by computing gross taxes as a proportion of pre-tax net income over the 20-year period. The following annual taxes are taken into account:

• corporation income taxes

• local property and business taxes

• corporation capital and U.S. franchise taxes

• taxes on payroll

• workers’ compensation premiums

• statutory pension and unemployment insurance premiums.

For U.S. firms, employer-paid health premiums are also included.

The following tax expenditures that benefit the manufacturing sector are also taken into account:

• investment tax credits

• tax holidays

• accelerated capital cost allowances

• preferential tax rates.

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Not included are enterprise zones, grants, and other forms of governmental and third-party financial assistance programs that are subject to an approval process.

For both the smaller and larger manufacturing firms, both Winnipeg’s and Brandon’s effective tax rates are well below the overall average (100.0).

Effective Tax Rates Smaller Manufacturing Firm	Effective Tax Rates Larger Manufacturing Firm
Source: Manitoba Finance	Source: Manitoba Finance

Overall Competitiveness

Overall competitiveness is compared by calculating internal rates of return, which are commonly used by business in making investment and location decisions. A higher internal rate of return indicates a city is more competitive than others. Internal rates of return for each city are calculated using start-up costs and cash March flow 30, 2012 over a 20-year period, specific to a smaller and a larger manufacturing firm, then discounted using applicable Canadian and U.S. commercial interest rates. The following charts illustrate Fixed: the combined impact of taxes and costs on the Fixed: internal rates of return for the representative smaller and larger manufacturing corporations in the selected jurisdictions.

The internal rates of return for both Winnipeg and Brandon are above the overall average of the cities included in the study. Brandon has the highest internal rate of return. Winnipeg has the third-highest internal rate of return for the smaller manufacturing firm and the fourth-highest internal rate of return for the larger manufacturing firm.

Among cities with populations over 500,000, Winnipeg has the highest internal rate of return for both smaller and larger manufacturing firms.

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Internal Rates of Return Smaller Manufacturing Firm	Internal Rates of Return Larger Manufacturing Firm
Source: Manitoba Finance	Source: Manitoba Finance

Internal Rates of Return Smaller Manufacturing Firm in Cities over 500,000	Internal Rates of Return Larger Manufacturing Firm in Cities over 500,000
Source: Manitoba Finance	Source: Manitoba Finance

¢ CONCLUSION

Manitoba continues to maintain a highly competitive overall business cost and tax environment for both smaller and larger firms engaged in manufacturing and processing.

Manitoba Finance’s March findings 31, 2012are consistent with the recently published March “Competitive 31, 2012 Alternatives 2012: KPMG’s Guide to International Business Location Costs,” which analyzes business Fixed: costs and other competitiveness factors of more than 110 cities in 14 countries. In the KPMG study, Winnipeg once again ranked as the most competitive among 25 larger North American mid-western cities. When smaller centres are included, Brandon ranked third and Winnipeg’s rank moves to fifth most competitive of 32 cities. Manitoba’s most cost-effective industries were in the R&D, digital and corporate services sectors (biotechnology, clinical trials, electronic product testing, digital entertainment, software design, professional services and support services).