The Manitoba Budget 2013 will change balanced budget legislation to increase the provincial sales tax (PST), in order to boost spending on critical infrastructure including flood prevention measures.
“The provincial government had been asked to consider a one per cent increase in the past and invest that money in the construction of infrastructure,” said Ronald Hambley, executive vice president of the Winnipeg Construction Association.
“This was a bit of a surprise because they were not supportive of this approach in the past. It’s encouraging, but it is difficult to see if the new revenue will be applied to infrastructure. They have increased the taxation rate for flood protection and infrastructure, but we need to see the plan.”
Manitoba Finance Minister Stan Struthers tabled the 2013 budget at the provincial legislature in Winnipeg on April 16.
The budget will invest $1.8 billion to build and renew critical infrastructure including roads, hospitals, schools and flood protection.
This is an $80 million increase from last year.
Manitoba is facing a threat from more frequent and severe flooding, and is currently facing the third major flood risk in the past five years.
The new Manitoba Building and Renewal Plan will raise additional revenue for infrastructure investment by increasing the PST to eight per cent from seven per cent.
The one per cent hike in the PST will expire after 10 years.
Provincial officials estimate the increase will raise about $277 million in revenues by the next budget.
According to Struthers, the new revenue will be used to take full advantage of the 10-year Building Canada Plan announced in the 2013 federal budget.
Struthers said every dollar generated for Manitoba’s Building and Renewal Plan will be dedicated to the construction of critical infrastructure, which will be guaranteed in law and reported on annually.
These revenues will be combined with the existing equivalent of one point of PST, which is already invested in municipal infrastructure, as well as revenue spent on highways from the gas tax.
Despite this fact, the Canadian Federation of Independent Businesses (CFIB) said the 2013 Manitoba budget will have a negative impact on the provincial economy.
“Eighty-six per cent of small business owners do not support raising the PST to pay for infrastructure,” said Janine Carmichael, CFIB’s Manitoba director.
“Investing in infrastructure is obviously important, but instead of making tough choices to fund priorities the government will require taxpayers to pay more. This is without a referendum, as the law requires. This government has a spending problem, not a revenue problem.”
Carmichael said the one per cent PST hike will cost the average family $300/year, which is money that will not be spent in local businesses.
In addition, the government is rewriting balanced budget legislation in order to avoid a public referendum on increasing the PST by one per cent.
The 2013 budget also promises to create new apprenticeship opportunities, by introducing a new training and skills development strategy.
Hambley said he believes the new strategy may be implemented to take advantage of the Canada Job Grant, which was announced in the 2013 federal budget.
The program will provide $15,000 or more per person for skills training.
The federal government will provide up to $5,000, which will be matched by the employer and the province/territory.
This year’s budget projects a $518 million deficit for 2013-14, compared to the $583 million deficit projected for 2012-13.
The minister confirmed the province’s multi-year financial plan is on track to return to balance by 2016-17.