2017-2018 Quebec Budget
NEW SPENDING FOR (ALMOST) ALL UNTIL… 2022!
A balanced budget and increased revenues for the government
In a budget which includes many measures to be deployed past the next elections, the government keeps targeting a balanced budget for the two coming fiscal years (2017-2018 and 2018-2019).
Quebec recorded a $250 million surplus in the fiscal year just ended.
The weight of the debt keeps dropping, and will reach 52.7% (gross debt) of Quebec GDP as of March 31, 2017, a decrease of .7 percentage point in one year.
Economic growth is accelerating, with a GDP increase of 1.7% in 2016 (1.2% in 2015). Quebec ends up having done better than Canada (1.4%) and the United States (1.6%). The government has set its economic growth projections at 1.7% for 2017 and 1.6% for 2018.
The projected growth of the government’s consolidated revenue should accelerate to 3.7%, compared with the increase recorded for the last fiscal year, of 2.3%. The target for consolidated expense growth is set at 3.6% for the coming year.
Among the most notable measures:
- Education gets new investments totalling $3.438 billion between now and the 2021-2022 fiscal year, in particular for early childhood, the school network and higher education;
- The infrastructures of the education network will also get fresh money, $1.13 billion, most of which will be invested by the end of the 2019-2020 fiscal year, on top of the amounts already projected for educational infrastructure in the Quebec Infrastructure Plan (PQI);
- Excluding infrastructure spending, the health network will get more money than education over the next two fiscal years, with new investments totalling close to $1.2 billion between now and 2018-2019, including $772 million in 2017-2018, that, among others, will bring the spending of health establishments to a level that will allow improved care accessibility and quality;
- Tax cuts will lighten the fiscal burden of taxpayers by $2.8 billion in total for the five coming years, through a continued elimination of the health tax, its refund for the year 2016, an increase in the basic personal amount starting in 2017 and the extension of the RénoVert program;
- Close to 1 billion will be invested in research and innovation.
New measures and a spirit of continuity
The government’s budget plan renews or extends some economic development measures announced in previous budgets, while adding new initiatives. Along with some tax measures, including a decrease in the general corporate tax level, Quebec will lighten the corporate tax burden by close to $3 billion between now and the end of fiscal 2021-2022 (including some measures announced last year).
- A gradual reduction in the general corporate income tax rate by .1 percentage point per year starting January 1st, 2017, to reach 11.5% by January 1st, 2020, putting Quebec’s corporate tax rate on a par with Ontario;
- The implementation of an additional deduction of 35% for depreciation in order to encourage the digital transformation of companies, in addition to the existing depreciation deduction, on investments made prior to April 1st, 2019;
- The reduction of the tax burden for SMBs by $1.7 billion between now and 2022, with a decrease in the premium rate to the Health Services Fund (FSS), the introduction of a premium holiday for the hiring of specialized workers (up to 2020), a tax rate reduction for SMBs (from 8% to 4%) in the primary and manufacturing sectors, and the introduction of an additional deduction for the transportation costs of manufacturing SMBs.
Among the new measures:
- The addition of $830 million between now and 2021-2022 to stimulate research and innovation, with:
- $180 million additional money to encourage research and innovation in higher education establishments;
- $100 million for the creation of a new artificial intelligence supercluster;
- $305 million to encourage scientific innovation and succession between now and 2022 to support research organizations or the implementation of new measures to encourage scientific innovation and succession, that will contribute to the new Quebec research and innovation strategy due to be unveiled by the Ministry of Economy, Science and Innovation;
- $118 million for the implementation of the life sciences strategy;
- $125 million to foster the development of the innovative manufacturing sector;
- $46 million to stimulate innovation in the forestry sector, in particular with the enhancement of the Innovation Bois program;
- $22 million to foster research in the maritime sector;
- $179 million are planned to support the integration of immigrants to the labour market;
- The creation of the Fonds d’appui au rayonnement des régions (Regional Outreach Support Fund) with a starting envelope of $310 million over five years, including $30 million in fiscal 2017-2018;
- $159 million to stimulate investments in the agrifood sector, i.e. $95 million to support investments in the agricultural sector and $43 million for innovative agriculture and food processing;
- $85 million to encourage sustainable mobility in the transport sector, among others with a new electric and intelligent vehicle industrial cluster, additional financing for the Roulez électrique (Drive Electric) program, and a pilot program to encourage the purchase of used electric vehicles;
- $70 million over 5 years for a new entrepreneurship action plan which will be unveiled in the near future;
- Creation of a pole of excellence in financial technologies;
- The government reiterates its confidence in natural gas as a transitional form of energy, with the three network expansion projects.
Among the measures extended or maintained:
- An extension of the tax holiday on large investment projects until December 31, 2020;
- The rebate on electricity rates to foster corporate investment, applicable since last January 1st, will continue until December 31, 2024 (applicable to consumers paying the “L” rate);
- The deduction for innovative businesses (DSI), which lowers to 4 % the tax rate on income linked to the marketing of a product incorporating a patent that protects an invention developed in Quebec.
Public transportation is the target of many measures, and Quebec confirms that the amounts required for three major projects have been reserved in the Quebec Investment Plan – 2017-2027, for the CDPQ Infra Metropolitan Electrical Network (REM), the extension of the Montreal Metro Blue Line and the Québec City-Lévis Rapid Bus Service.
With the support for the creation of the new Metropolitan Transportation Regional Authority (ARTM) and other measures, the sums allocated to public transportation reach close to $1.5 billion.
Reduction in the taxpayers’ tax burden
Quebec announces a general tax cut for all taxpayers with the enhancement of the basic personal amount starting in 2017. This measure gives every taxpayer a $55 tax break, with the basic amount increasing from $11,635 to $14,890, and the conversion rate for the basic tax credit lowered to 16%.
In addition, the abolition of the health tax, originally planned for 2017, is retroactively moved up to fiscal 2016 for close to 4.3 million taxpayers with incomes of $134,095 or less. The refunds will be between $50 and $200 depending on the amount paid.
Education and early childhood
The new amounts announced for the education sector include in particular the future implementation of an initial educational success policy.
The policy outlines an additional $1.8 billion to support preschoolers, primary and secondary students as well as their parents, and $130 million over six years for early childhood. This measure will translate in the addition of 1,500 people in direct student services as soon as next September.