There were two budgets announced recently. The federal government announced its annual budget in March and the Province of Manitoba announced its budget changes in April.

The Province of Manitoba’s budget announced in April had the biggest outrage over the 1% increase to the provincial sales tax. It may be a 1% increase in the tax rate, but that equates to a 14% increase! (1/7 = 14%).

They announced that “everyone pays” which is true and they may think that it is fair, but it is considered a regressive tax. Regressive taxes make everyone pay the same. However, those on low incomes pay more than their fair share. Individuals and families with lower incomes use more of their income to pay for goods versus those with higher incomes that do use some of their disposable income to actually save money.

A PST Credit much like the GST Credit could be introduced to help lower income individuals and families in Manitoba.

The Province also re-announced that they are increasing their basic personal amount by $250 from $8,634 to $8,884 in 2013. This is still far behind the federal amount of $11,038. Also this reduces revenue received from everyone, including the wealthy tax payers. I believe it’s time to start increasing the basic credit for lower income Manitobans.
The minimum wage in Manitoba is going up to $10.45 later in 2013. Guess what – more tax revenue for the province and the feds. If they were truly concerned about those earning minimum wage, they would stop taxing them as soon as their income exceeds $8,634. The BC government has a calculation in their income tax that ensures lower income individuals and families don’t pay any provincial taxes. Our province should do the same.
The elimination of school taxes for all seniors by 2015 benefits low income seniors. However many seniors are wealthy and can afford to pay for the schooling of this province’s children, as other tax payers had supported their children.

I suggest the government should eliminate all school taxes on all property taxes (not just seniors) and the lost revenue should be garnered from increasing income taxes on higher income Manitobans. Payment of school taxes should be based on the ability to pay (income level) and not on the value of a home.

As you can tell, I’m not impressed with the recent provincial budget. It hurts lower income families the most.

Federal Budget

The federal budget didn’t have much change that affected the typical individual tax payer. The only one that I find most unfair is an announcement of a review of taxes on trusts.
Most people may think that doesn’t affect them and that it’s only the rich that use complicated items like trusts. But I help families file taxes on trust accounts every year. It’s typically an estate trust for a family member who recently died. And often the only item being taxed is the Canada Pension Plan Death Benefit (maximum is $2500).

When someone dies and the CPP death benefit is received by family (often a surviving spouse), the CPP death benefit is a taxable income. We normally treat it as a separate tax return. If I include it in the tax return of the surviving spouse, it can affect the guaranteed income supplement and the Manitoba Pharmacare deductible. The taxes payable on the CPP death benefit is often better taxed separately than affecting various benefits.

So if the feds think they are only affecting the wealthy, they need to think again. I plan to provide some commentary on this subject to the federal government since they plan to “consult” with the financial industry.

Temporary First-Time Donor’s Super Credit (FDSC)

The federal charitable donation tax credit provides individuals with a non-refundable tax credit of 15% on the first $200 of annual contributions plus 29% on donations in excess of $200. (Province of Manitoba credits increase it to 26% and 46% respectively.)
To encourage charitable giving by new donors, a temporary First-Time Donor’s Super Credit (FDSC) is being introduced.

The FDSC will be in addition to the tax credits currently provided and will be equal to a 25% tax credit for first-time donors on donations up to $1,000.

A first time donor who donates $1,000, could get a combined credit of 50% on the first $200 and 71% on the amount between $200 and $1,000. That’s great news for first time donors. I hope to encourage many people to become first time donors and take advantage of this additional credit.

An individual will be considered a first-time donor if neither the individual nor the individual’s spouse or common-law partner has claimed the charitable donation tax credit (or the new FDSC) in any taxation years after 2007. The additional tax credit is only available on cash donations and only on donations made on or after Budget Day. The FDSC may only be claimed once between 2013 and before 2018.

Keep in mind these credits only help you if you actually have taxes payable. Many low income families and seniors do not have taxes payable and are unable to use charitable donations (a non-refundable tax credit).

June 15 Deadline

A reminder to get your taxes done! If you are self employed, we have until June 15 to file our taxes without any penalty on the amount owed.

If you are expecting a refund, you have three years to file your taxes.

If you are not self employed and you missed the April 30 deadline and you owe, just try to get them in as soon as possible to minimize the penalty. The penalty is 5% of what you owe as at April 30 and an additional 1% each month you delay. Plus interest at 5%. So the sooner the better! If it’s not the first time you missed the deadline (April 30 or June 15) the penalties become even greater.

Don’t panic; just call me or drop on by.

Anni Markmann is a Tax Professional and owner of Ste Anne Tax Service. She lives, works, and volunteers in our community. Contact her at 204-422-6631, or 36 Dawson Road in Ste Anne.