2019-2020 Quebec Budget: Raymond Chabot Grant Thornton Publishes Its Tax Bulletin and Voices Its Opinion
Québec City, March 21, 2019 – The tabling of the Quebec budget today once again brings Raymond Chabot Grant Thornton to issue comments and publish its tax bulletin, which was drafted during the day by a team of tax experts present at the lock-up in Québec City.
Welcomed measures, but insufficient for addressing short-term labour shortage
From the outset, the firm would like to underline the measures for stimulating investments and inciting workers to remain longer in the labour market of Quebec businesses. Tax Partner Luc Lacombe stated: “The $1B increase in share capital from Investissement Québec, bringing the amount to $5B, is good news for businesses, as is the creation of a $1B envelope from the government to support the strategic development of our businesses and protect the presence of head offices.”
Lacombe adds: “Increasing the tax credit for experienced workers and lowering the age of eligibility to 60 years, as well as reducing payroll costs for workers 60 years and older, are also promising measures for our businesses. However, we would have expected more for increasing their competitiveness, particularly from a tax standpoint, and accelerating the integration of foreign talent into the workforce.”
President and CEO, Emilio B. Imbriglio pointed out: “The announcement to better integrate immigrants within communities and into employment, with an additional contribution of $146M per year, for the next five years, is very good news indeed. However, our short-term challenge is to ensure that our businesses from every corner of the province, no longer put contracts on ice or refuse projects due to a labour shortage. According to Emploi Québec, in the next few years, immigration will represent a 22% inflow of labour, the second most important source for our Quebec businesses. It is therefore urgent to accelerate the integration of temporary and permanent workers into the workforce for our businesses to succeed.”
Marc Audet, President of AURAY Capital, a subsidiary of Raymond Chabot Grant Thornton, made it clear that: “While Quebec’s permanent economic immigration is very important and should be better adapted, temporary immigration is necessary to quickly fill key positions across the province. It’s obvious that the process is too long and there’s still too much red tape in a world where unemployment rates are at their lowest. Moreover, government programs such as the Business Assistance – Immigrant Investor Program, the Employment Integration Program for Immigrants and Visible Minorities and the one relating to the Innovative Manufacturer need to be more interrelated. Why can’t we use part of the funds generated by the immigrant investor program envelope, which is not subsidized by the State, to cover part of our businesses’ onerous costs for recruiting abroad? Surely, such small adjustments would help support the growth of businesses in Quebec.”
Further tax cuts needed
Even with the tax cuts already announced by the provincial government, Quebec businesses will not regain the tax advantage they enjoyed vis-à-vis the United States. With a 4% tax rate for all SMEs in Quebec by 2021, they will not be able to stand out from the other provinces either.
Lacombe also raised this issue: “Our firm continues to demand the elimination of tax on SMEs’ first $500,000 of taxable income.They must be able to use these savings to produce more, innovate and recruit more talent, here and abroad. If the government increased the accelerated capital cost allowance to 100% for the first year on all business investments, as is the case in the United States, this would have a very positive effect on our businesses’ competitiveness.”
More succession plans and less restrictions on intergenerational business transfers: A necessity for Quebec
How can we ensure the success of the next generation if only 8% of all entrepreneurs have a formal succession plan?
According to the firm’s Regional Vice-President and National Business Transfer Leader, Éric Dufour: “Specific measures are needed, such as the creation of a fund to support businesses in order for professionals to assist them implement a succession plan that takes into account all issues, whether they are of a fiscal, strategic, human, legal or financial in nature. The challenge is too great to delay the introduction of structuring measures, such as the certification of stakeholders to accompany entrepreneurs in their transfer process, the endorsement of these plans by a government authority or even an increase in the new Quebec Business Transfer Fund.”
In addition, even if Quebec has loosened the tax law to make things fairer for intergenerational business transfers, unlike the federal government where the issue remains unresolved, the firm highlights that very restrictive conditions persist that do not always favour family takeovers. Dufour concludes: “Restricting transferors from making complete, and not partial, business transfers, and preventing them from receiving post-sale interest, which would protect them from being taxed on the transaction’s capital gain, hinders the long-term existence of our family businesses and Quebec entrepreneurship.”
Please consult the pre-budget recommendations submitted to the Canada and Quebec Finance Ministers by Raymond Chabot Grant Thornton.
About Raymond Chabot Grant Thornton
Founded in 1948, Raymond Chabot Grant Thornton has become a Canadian leader in the areas of assurance, tax, advisory services and business recovery and reorganization, with more than 2,500 professionals, including approximately 200 partners. Together, Raymond Chabot Grant Thornton and Grant Thornton LLP, another Canadian member firm of Grant Thornton International Ltd, comprise more than 4,400 professionals and close to 170 offices across Canada to help Canadian organizations achieve their full growth potential both locally and globally. Grant Thornton International Ltd provides clients with the expertise of member and correspondent firms across more than 135 countries and more than 50,000 professionals.
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