Quebec Budget 2021-2022: Economic stimulus and deficits for at least 7 years
Raymond Chabot Grant Thornton wishes to share its views on the Quebec budget tabled on March 25. This follows the tax bulletin the firm’s experts published on Finance Minister Éric Girard’s third budget.
Accelerating Quebec’s economic recovery: the budget sends a strong message
Raymond Chabot Grant Thornton applauds the stimulus measures designed to revive the economy and provide some relief to small and medium-sized enterprises (SMEs) across the province. Specifically, the firm highlights three important tax measures.
“Doubling the C3i investment and innovation tax credit over the next two years; increasing the tax credit for on-the-job training; and reducing the small business tax rate from 4.0% to 3.2% on the first $500,000 of income eligible for the small business deduction—which is the same as the rate in effect in Ontario—as of March 26, 2021; we believe that these are key measures for supporting growth,” said Sylvain Gilbert, Tax Partner at Raymond Chabot Grant Thornton.
In addition, “injecting an additional $4.5 billion into Quebec’s 2021-2031 Infrastructure Plan, bringing the total to $135 billion, is an excellent idea, as is the decision to accelerate these investments, with 60% to be made over the next 5 years. Infrastructure projects will get underway quickly and stimulate the economy across all Quebec regions,” added Patrick Delisle, Tax Partner at Raymond Chabot Grant Thornton.
Raymond Chabot Grant Thornton also welcomes the following measures, which promise to help Quebec’s regional economies recover and support some of the province’s key industries, such as culture and tourism, that were particularly hard hit by the pandemic:
- $404 million over 5 years to support the requalification of workers and help immigrants integrate into the labour market;
- $392 million and $204 million over 9 years for culture and tourism, respectively;
- An extra $523 million for regional economic development.
Bold solutions for wiping out the pandemic debt
It is clear that, to varying extents, each of these measures will contribute to Quebec’s economic recovery, provide valuable support to SMEs, which are a key economic driver, and promote development across all of the province’s regions.
“The government has made sound decisions on how to address the exceptional economic situation. Where public finances are concerned, it would have been strategic to introduce bold, temporary measures, like the ones recommended by our firm, to bolster public coffers and bring down the pandemic debt faster,” said Emilio B. Imbriglio, President and Chief Executive Officer at Raymond Chabot Grant Thornton.
Raymond Chabot Grant Thornton published its 2021-2022 prebudget proposals (in French) in February. The firm had proposed giving taxpayers the opportunity to pay deferred taxes—amounts that would nonetheless be owed at a later date—immediately but at a reduced rate, so that the government could generate additional revenues to pay off public debt more quickly and thereby reduce the burden on future generations. Another suggestion presented by the firm was to allow taxpayers to withdraw funds from their RRSPs at a combined tax rate of 15%, payable immediately, by establishing a structured mechanism to ensure the sound management of the retirement fund. Raymond Chabot Grant Thornton also recommended allowing taxpayers to pay capital gains tax on assets (shares, revenue properties, etc.) at a combined tax rate of 15%.
“Drastic action is needed to protect our future generations. The governments of Quebec and Canada should consider options such as these to remove pressure off public finances. Applied for a temporary period, such measures could prevent a public finance crisis, especially if interest rates go up and the pandemic drags on, which would unfortunately leave certain key economic sectors in a difficult position for longer than expected,” added Mr. Imbriglio.
Comprehensive assistance for entrepreneurs: a solution for many ills
Raymond Chabot Grant Thornton would have also liked to see, as outlined in its pre-budget solutions, more done to support entrepreneurs on both the professional and personal levels. This should be a priority, as it would promote a true, healthy economic recovery.
“The pandemic took a major toll on the mental health of business owners. By providing them with support, we can help them make better decisions. There are currently many issues keeping them awake at night. In addition to personal problems, a lot of entrepreneurs are extremely worried about things like cash flow, revenue, profit and expenditure management. Unfortunately, these concerns will negatively impact the way they manage their businesses,” said Éric Dufour, Regional Vice-President and National Business Transfer Leader at Raymond Chabot Grant Thornton.
An assistance program, supported by external experts, would allow entrepreneurs to obtain a comprehensive business diagnosis to make informed decisions and manage their organizations more effectively, particularly in a fast-changing business context. This type of support is needed and should be made available quickly.
“We appreciate that the Government of Quebec is faced with a complex and unusual situation. We applaud its skillful handling of the situation and believe that the measures announced on March 25 will actively contribute to the recovery that our economy needs. Since Raymond Chabot Grant Thornton is a trusted source of expertise for the government, as well as for public and private businesses across the province, our 2,700 professionals remain committed to offering Quebec businesses—which are, after all, the drivers of our economy—all the support they need to get through the crisis. Together, we can come out ahead!” concluded Mr. Imbriglio.