2019-2020 Budget: More money for our businesses, but more work needs to be done

According to Finance Minister Éric Girard, the aim of the first CAQ government budget is to invest now to control our future. According to the master of the public purse, the budget was prepared “based on your priorities”.

Thanks to the current fiscal surplus estimated at $2.5B at the end of 2018-2019, the Government is projecting a balanced budget this year as well as for the next four years without need to use the stabilization reserve.

A number of the measures announced are designed to put more money in the pockets of Quebeckers, including the gradual elimination of the childcare contribution and a standardized school tax. Adding to the measures announced in the 2018 fall update (like the new Family Allowance and the new tax credit for seniors) which will give $360M back to taxpayers, the Government will now be putting nearly $1B back in the pockets of Quebeckers starting in 2019-2020.

A boost for businesses but not enough to improve tax competitiveness

Labour

To create a more competitive and innovative Quebec, education is the cornerstone. The 5.1% increase in the budget for education and higher education in 2019-2020 would mean an additional $2.4B in resources for education and higher education over five years.

Since the labour shortage is a major issue over the short term, it would have been nice to see measures to speed up worker recruitment. However, we should highlight the announcements aimed at better integrating immigrants into the workforce. With an additional $146M per year over five years, for a total of $730M, the Government wants to implement a new personalized pathway to support immigrants in their integration into Quebec society, including the labour market.

The announcements encouraging workers to stay in the labour market are interesting, including the expansion of the credit for experienced workers and the lowering of the age of eligibility for this tax credit to 60. The reduction in payroll expenses related to wages paid to workers aged 60 and over is also worth mentioning. This reduction would benefit 34,000 Quebec SMEs.

Also, the injection of $75M over six years to support entrepreneurship and encourage the next generation of young entrepreneurs is an interesting announcement to stimulate job creation and entrepreneurial labour, although the amounts could be larger.

Capital and Financing

To stimulate private investment, the government also decided to increase the share capital of Investissement Québec from $4B to $5B in order to be able to carry out more interventions using its own funds. Another measure to be highlighted is the creation of an envelope of up to $1B to support the development of strategic businesses in Quebec and to protect the presence of head offices in Quebec. Given that new technologies are key to productivity and innovation for businesses, the announcement of $329M over six years to accelerate the development and adoption of artificial intelligence by businesses is very good news.

Corporate Taxation

There are no new corporate tax cuts in this budget. In a very competitive business environment, particularly with our neighbours to the south, we have to recognize that this budget gives our businesses more means, but there is still work to be done. The lost tax advantage of Quebec’s economic engines over the Americans must be restored.

For more information on the tax measures announced in the 2019-2020 budget, please consult the document below.

Consult our press release for 2019-2020 Quebec budget here.

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On March 19, 2019, Finance Minister Bill Morneau presented the government’s 2019-2020 federal budget. This tax alert provides a summary of the tax measures proposed in the budget.

As many had predicted, this pre-election budget features many fresh spending promises, with little in terms of new tax legislation. Although the budget includes some smaller initiatives and technical changes, there are few surprises.

Overall, the most significant changes focus on:

  • Skills upgrades and training
  • Seniors’ retirement income
  • Home-buying affordability
  • Innovation
  • Regulatory reform
  • Country-wide broadband
    connectivity

Proposals that might be of particular interest to Canadian businesses include the creation of a new national training benefit program, new funds for research and innovation, measures intended to support entrepreneurs and plans to streamline certain areas of federal regulation to reduce regulatory burden. In addition, provisions concerned with tightening international tax rules and increasing beneficial ownership transparency may prompt some companies to review and update their compliance practices.

The budget was relatively silent on matters related to current and pending trade agreements—with the exception of a promise of support for supply-managed farmers impacted by CETA and CTPPP—and it does not contain any proposals to address the gap in corporate tax rates between Canada and the United States, nor the existing tariffs on Canadian aluminum and steel.

A number of measures were announced where the legislative details have yet to be released—such as new limits on stock options and greater support for intergenerational business transfers—that are worth watching closely as the specifics develop.

Access our full Budget 2019 Summary below.

Consult our press release.

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We begin this first edition of 2019 by considering the potential financial reporting implications of the UK leaving the European Union without a transition deal.

As the UK’s exit date of March 29, 2019 draws in closer, this is a scenario which needs to be considered seriously by entities that trade with, or have operations within, the UK.

We then move on to look at proposals the International Accounting Standards Board (IASB) currently has out for comment before looking at thematic reviews of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers that have recently been published.

Further on in the newsletter, you will find IFRS-related news at Grant Thornton and a general round-up of financial reporting developments.

We finish with a summary of the implementation dates of recently issued standards and a list of IASB publications that are out for comment.

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Emilio B. Imbriglio
President and Chief Executive Officer | FCPA, FCA, MBA, CFE, ICD.D.

There is a marked shift in Quebec’s business landscape as emerging leaders and entrepreneurs begin to take the reins and drive our economy into the future.

During the event highlighting the candidates for the Person of the Year Awards, I had the opportunity to meet these leaders who are changing today and tomorrow’s business world.

In 2018, 75 Quebec companies made the Growth 500 list of fastest-growing companies in Canada. What makes Quebec a conduit for promising start-ups and internationally minded businesses and a breeding ground for top talent? The recipe is simply put: innovation and education.

Innovation: the ability to see beyond what meets the eye

According to the Canada Economic Development for Quebec Regions Strategic Plan 2021, 26% of Canadian R&D expenses are attributed to the province of Quebec. Innovation is tightly woven into the fabric of Quebec. By altering processes and ideas and pushing boundaries, leaders and entrepreneurs apply ingenuity and creativity to address current needs and anticipate future ones. This type of foresight is crucial to creating businesses that will respond to the demographic landscape of the future.

New businesses and leaders are innovating in a variety of ways.

Artificial intelligence and technology for growth

Companies are increasingly relying on artificial intelligence and technology to improve existing processes in traditional sectors. One just has to look at the way the fourth industrial revolution is changing the manufacturing sector. In fact, 73% of manufacturing companies in Quebec are using some type of automation while medium-sized companies surpass this average with 83% of them using automation.

Artificial intelligence and new technologies are also changing the way we do things and think, creating new markets in emerging sectors. Algorithms, virtual and augmented reality, and the Internet of things are some examples. At Raymond Chabot Grant Thornton, we have developed a powerful algorithm that can identify students at risk of dropping out of school, a tool commissioned by the Val-des-Cerfs School Board and gaining attention across the province.

Challenges turned into business opportunities

New entrepreneurs are innovative in considering modern-day challenges as business opportunities. For example, LOOP juices, a division of Courchesne Larose, is creatively repurposing food waste by making cold-pressed juices and other drinks from (yet still edible) outcasts of the food industry.

Education: the genesis of the entrepreneurial journey

Innovation alone already sets us apart, but coupled with education, its power is exponential. In Quebec, we have the foundation for innovative ideas to become thriving businesses, thanks to world-class universities and training programs in arts, design, hi-tech and sciences, and the support of both the business world and government. In fact, Montréal produces one of the largest number of new university graduates in Canada. Close to 50% of the city’s population possesses a university certificate or diploma (Institut de la statistique du Québec, Panorama des régions du Québec 2017, p.45).

We need to assert the importance of education whenever the opportunity arises and to enhance the status of apprenticeships, recognize the work of educators, encourage young people to stay in school and support sports-study and arts-study initiatives. Promoting academic achievement is the key to success for all Quebeckers and for an innovative, creative and competitive province.

What’s in store for the future?

Quebec’s entrepreneurial ambition is driven by equal doses of innovation and education. It is what propels the province and sets it apart. Our skilled leaders and entrepreneurs are innovating in a myriad of ways and are consistently staying one step ahead, foreseeing what will be important to people in the coming years. These are not just trends, they are shaping our province, one idea and one business at a time.

11 Mar 2019  |  Written by :

Mr. Imbriglio is partner and the President & CEO of Raymond Chabot Grant Thornton. He is in charge...

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