More robust measures to spur business growth would have been desirable
Provincial budget, March 17, 2016
This third budget of Philippe Couillard’s government is balanced, like the previous one. While it is commendable to have a balanced budget which seeks to align living within our means and stimulating economic growth, more weight should have been given to the latter option to avoid further hampering the growth potential of Quebec and its wealth creators.
Raymond Chabot Grant Thornton would have liked to see more new measures to support the development of wealth creators, such as an innovation tax credit or elimination of income tax on SMEs (on the first $500,000 in income).
Education: at the heart of priorities
Raymond Chabot Grant Thornton is pleased to see additional investments in education. Improving student services by some $500M over the next three years is an effective way to support the success of future generations and tomorrow’s leaders who’ll be heading our economic drivers, our businesses.
Good measures for businesses but no reduction in the general tax rate
Starting this year, SMEs will receive payroll tax relief amounting to $94M. In 2020-2021, the relief will amount to $385M, which is $101.5M more than previously announced. We applaud the additional reduction in the Health Services Fund (HSF) contribution, for example, as well as the following measures:
- $135M in relief by 2021 for companies that market a Quebec-developed innovation. This represents a reduction to 4% of the tax rate on revenue attributable to a patent, which otherwise would have been 11.8%. This deduction is intended to encourage businesses entitled to tax credits for research and development to market their innovations in Quebec;
- $65M in resources is earmarked for the 2016-2021 period to recapitalize or fund three funds specialized in innovative business start-ups, for a global capitalization of $125M;
- $96M increase in the capitalization of Fonds Teralys Capital Innovation;
- $162M for implementation of the Québec digital strategy over the 2016-2021 period;
- $32.5M over three years to support exporting SMEs that want to bring their innovation activities to fruition;
- Immediate implementation of the tax relief for transfers of family businesses in the primary and manufacturing sectors rather than January 2017. Raymond Chabot Grant Thornton continues to focus on the issue of tax equity for business transfers in its representations, since the problem remains, particularly for service enterprises.
There is no doubt these measures are of interest to businesses, but reducing the income tax rate is the best approach to helping them be more competitive. For this reason, Raymond Chabot Grant Thornton still considers it necessary to eliminate income tax on the first $500,000 of an SME’s income.
As for the tax system in general, the first recommendation of the Godbout report to initiate a major tax system reform could have been announced. This process must be started quickly, not only in the interest of businesses, but for all Quebec taxpayers.