QUÉBEC, March 26, 2015 /CNW Telbec/ - The Québec government's Economic Plan contains measures to ease the tax burden of individuals and corporations by more than $2.5 billion over the next five years. The plan thus aims to encourage work and investment and thereby stimulate Québec's economic growth.
"The government is putting in place three measures to reduce the tax burden on individuals by $2 billion over the next five years and boost their purchasing power: gradual elimination of the health contribution, introduction of a tax shield and enhancement of the work incentive for experienced workers," Minister of Finance Carlos Leitão said.
Gradual elimination of the health contribution
The health contribution will be eliminated gradually starting in 2017. As of the first year, it will be eliminated for nearly 2.1 million taxpayers. Once the contribution is fully eliminated, by 2019, 4.5 million Quebecers will see a reduction in their tax burden. "This measure will put $1.7 billion back in taxpayers' pockets by 2019-2020," the Minister added.
In addition, to provide more incentive to work, the government is introducing, starting in 2016, a tax shield that will protect workers making an additional work effort by limiting the loss of certain tax benefits related to an increase in their income. This shield will take the form of a refundable tax credit that will partly offset the decrease in the work premium and the tax credit for childcare expenses.
The tax shield amount will vary according to the family situation and income level of households. This measure represents annual tax relief totalling $52 million for nearly 400 000 workers as of 2016-2017.
For example, a couple with a three-year-old child attending a private unsubsidized daycare whose income of $40 000 in 2015 rises to $45 000 would be able to recover $570 as a result of the tax shield.
Enhancement of the tax credit for experienced workers
The government is also announcing an enhancement of the tax credit for experienced workers, as of 2016, to encourage them to stay on the labour market for longer. The maximum eligible amount will be adjusted based on age and reach $10 000, in 2018, for workers aged 65 and over.
Once the measure is fully implemented, a 63-year-old worker will be able to avail himself or herself of a new tax advantage of up to $902. For a worker aged 65, the reduction will reach $1 504.
"Québec will be confronted with a major challenge in regard to manpower in the coming years and we want to create conditions that will encourage more experienced workers to pursue their career for longer and thus help not only to fill obvious needs but also ensure the transfer of knowledge and expertise to the decision makers of tomorrow," Mr. Leitão noted.
These three measures will lead to a reduction in the tax burden on individuals that will reach $800 million per year as of 2019-2020.
Tax relief for corporations
The Economic Plan is also providing for tax relief for corporations, which will reach $215 million per year as of 2019-2020. To that end, the government will give preference to generally applicable measures that will enable as many of Québec's entrepreneurs as possible to benefit from a competitive tax system.
"Over the next five years, these actions by the government will represent a total reduction of $500 million in the tax burden on corporations. This will allow them to gain maneuvering room for investing in their development and creating jobs in all of our regions," the Minister said.
Reducing the tax burden of SMBs
The government recognizes the importance of SMBs for the Québec economy and wants to provide them with a competitive tax system that fosters growth, investment and job creation. Therefore, the Economic Plan includes two measures aimed at reducing the tax burden of SMBs as of January 1, 2017:
- a reduction in the tax rate, from 8% to 4%, for SMBs in the primary sector, which includes, in particular, forestry, agriculture and fishing;
- a gradual reduction in the Health Services Fund (HSF) contribution rate, from 2.7% to 2.25%, for SMBs in the service sector.
Provision is also being made to refocus the small business deduction on job-creating SMBs.
"SMBs are the main engine of the Québec economy. They account for two-thirds of private sector jobs and 99% of Québec businesses. We must provide them with the tools they need to flourish," the Minister declared.
Making taxation more favourable to investment
Based on a recommendation of the Québec Taxation Review Committee, the Economic Plan also contains measures to stimulate business investment:
- a gradual reduction in the general corporate income tax rate from 11.9% to 11.5%;
- the maintenance, until 2022, of the tax credit for investments relating to manufacturing and processing equipment for the regions.
"Lowering the general corporate tax rate will benefit over 90 000 businesses in every sector. Indeed, they will see their tax burden reduced by over $120 million per year starting in 2019-2020. Owing to this reduction, Québec's businesses will be taxed at the same rate as those of Ontario." Mr. Leitão said.
Ensuring the effectiveness of sector-based tax assistance
In order to maintain the competitiveness of companies in growth and strategic sectors for the Québec economy, the Economic Plan is providing for an increase in the tax credit for the production of multimedia titles and the tax credit for the development of e-business.
This change is accompanied by adjustments to better target government assistance, which will increase the effectiveness of the tax credits, while maintaining the tax spinoffs.
"We are taking action so that Québec will continue to be a leader in these cutting-edge sectors by providing businesses with a stable and predictable fiscal environment to encourage them to invest and thus contribute to economic growth," the Minister explained.
Increase in tax credit rates for Québec's cultural sector
Québec's cultural businesses are facing numerous challenges. The government wants to provide them with the tools they need to develop and promote Québec's cultural offering, both in Québec and abroad.
Accordingly, the Economic Plan proposes to increase several tax credits that will help, in particular, film and television production, film dubbing, the production of shows, the production of sound recordings, book publishing and the production of multimedia environments or events staged outside Québec. These measures will total $85 million by 2019.
Supporting the activities of tax-advantaged funds
In the Economic Plan, the government is also maintaining its support for the three tax-advantaged funds by giving them the means they need to continue to contribute to the economic development of Québec and encourage Quebecers to save. Accordingly, the government:
- confirms that the ceilings set on share issues by labour-sponsored funds for their fiscal year 2014-2015 will be removed in 2015-2016 and that Capital régional et coopératif Desjardins (CRCD) will be able to issue $150 million worth of shares for 2015;
- announces an increase, from 15% to 20%, in the tax credit rate for Fondaction for its fiscal year 2015-2016.
On the other hand, in keeping with the recommendations of the Québec Taxation Review Committee, the government will ask the tax-advantaged funds to contribute more to Québec's economic development by fostering, in particular, investment in the regions.
"The tax-advantaged funds play an important role in the Québec economy and, for this reason, we are continuing to support their development. They help finance Québec's SMBs in all sectors and promote the creation and maintenance of a high number of jobs in all regions," Mr. Leitão concluded.
SOURCE Cabinet du ministre des Finances
For further information: Andrée-Lyne Hallé, Press Relations Officer, Office of the Minister of Finance, 418 643-5270