This budget sees Quebec enjoying a time of robust economic growth as a result of renewed confidence in the province’s fiscal management and it presents the fourth balanced budget in a row tabled by the province’s Liberal government.
A surplus of $904 million is being projected for the 2018-19 fiscal year and gross debt levels are being presented at 49.6% of the province’s GDP as at March 31, 2018 - a decrease from the 2015 peak of 54.3%. This reduction in debt levels is allowing the province to invest in modernizing its infrastructure and enter a new era of major strategic projects in sustainable mobility. Support was expected for small and medium-sized businesses (SMbs) and the budget did not disappoint. Tax relief measures totaling $2.2B will be introduced by 2022-2023 to boost their competitiveness.
Corporate contribution rates to the Health Services Fund will be reduced, providing SMBs with $1.2B in savings by 2022-23.
The income tax rate for SMBs in the service and construction sectors will be gradually reduced from 8% to 4% by 20222023, with the objective of having these SMBs eventually benefit from the same rates as SMBs in the primary and manufacturing sectors. This measure will result in a $1B tax reduction for such entities by 2022-23.
Additional support is being provided to Quebec businesses to help them foster innovation and carve out a place for themselves on the international market.
Support of $60M by 2019-2020 has been announced to promote the development of supply chain networks using artificial intelligence. Additionally, relief totaling $271M has been provided to accelerate business investment within the province over the next five years. These enhancements are the result of increasing the capital cost allowance rate from 35% to 60% on the acquisition of cutting-edge technologies and extending this rate until March 31, 2020.
Over the next five years, an additional $800M in funding will be allocated to the National Workforce Strategy created to address the challenges faced by Quebec’s labour market. Among other measures introduced in the strategy, a new tax credit for SMBs that allow their employees to take time away from their jobs for professional development will be provided. Tabling of the 20182023 National Workforce Strategy will take place in a few weeks.
Additional funds totaling $724M will be allocated over the next five years to support the economic development of all regions in Quebec. This support will include measures to strengthen the forestry sector, develop wildlife and wildlife habitats and assist with developing the mining sector among others.
The government is announcing a review of the province’s voluntary disclosure program with the potential objective of tightening up the eligibility conditions as was done by the federal government in December 2017.
Specific measures proposed in this budget that may be of interest to business owners outside Quebec relate to the development of a new Quebec Sales Tax (QST) registration system for non-resident suppliers without a physical or significant presence in Quebec, providing services or content through digital platforms and e-commerce, which would require the collection QST by such entities.
For more information on the tax measures announced in the 2018-2019 budget, click here.