Small businesses should be happy about new income tax reductions, which went into effect on January 1.

Tax rates for small businesses will drop to two per cent (from three), this will make them the lowest of any province in Canada. In total, $10.5 million in reductions will occur.

The province is also spending $16 million to start the phase-out process of the corporate capital tax, a 20 per cent reduction.

Other business tax cuts include:

• Reduction of corporate tax rate to 13 per cent, effective July 1,
• Farmland education tax rebate to be increased to 70 per cent,
• updating of the Community Enterprise Investment Tax Credit,
• the Film and Video Production Tax Credit will be extended.

"Our multi-year plan will see continued reductions to the corporate and small business rates, reductions in the personal income tax rates, increases in the bracket thresholds, the elimination of the corporation capital tax and further reductions to the farmland education property taxes," said Finance Minister Greg Selinger.

The tax cuts are not restricted only to businesses, as personal tax cuts are also decreasing. In all, $112 million has been allocated for the cuts.

Overall, $39.6 million will be allocated to reducing personal income tax. This includes increasing the middle income window to $66,000, increasing the personal exemption by $200, and increasing how much is refundable from the Manufacturing Investment Tax Credit.

Also, the payroll tax upper limit for health and post-secondary education will be increased to $1.25 million.

"The tax cuts taking effect in 2008 build on our government's long-term plan has seen decreases in personal and business taxes," said Selinger. "The reductions ensure Manitoba remains an affordable place to live, work, raise a family and operate a business."

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