A balanced budget
Quebec confirms that it has eliminated the deficit for 2015-2016 and is presenting a balanced budget for 2016-2017, as expected.
The debt level as at March 31 will also decrease by 0.1 of a percentage point to 55% of the GDP. The target remains at 45% of GDP by 2026.
Expenditure growth: 2.5% last year; 2.4% predicted for this year | +3.2% for consolidated revenue
Growth of consolidated expenditure (excluding debt servicing) sits at 2.5% for the fiscal year just ended, and the predicted rate for the fiscal years up to 2021 is between 2.3 and 2.4%, broken down as follows:
- 2.4% expenditure growth for fiscal 2016-2017 and 2017-2018
- 2.3% expenditure growth for fiscal 2018-2019 and subsequent years
Consolidated revenue is expected to increase by 3.2% in 2016-2017 according to government predictions. For 2017-2018, the expected growth in consolidated revenue is 2.7%.
With an economic growth rate of 1.1% in 2015, Quebec’s GDP should rise to 1.5% in 2016-2017, although the 2015-2016 budget had predicted a rate of 1.9% for that same period.
- Quebec’s projected economic growth is greater than that of Canada as a whole, where 1.3% growth is expected for 2016-2017.
- Ontario has a better outlook, with a projected increase in GDP of 2.2% for next year.
EDUCATION TAKES ON CENTRAL ROLE
The government’s education plan involves investments of $1.2 billion over three years, with funds earmarked for both direct services and infrastructure in the education sector.
$500 million towards improving academic success:
- $300 million to provide a stimulating learning environment and encourage students to stay in school
- $120 million to motivate students and instill a desire to succeed, in particular through physical activities and strengthening ties with various partners in the community, such as those involved in the cultural sector
- $80 million to strengthen ties between education and higher learning networks and businesses
An additional $700 million in Quebec’s infrastructure plan, the Plan québécois des infrastructures, to renovate and improve educational facilities
The plan also includes:
- $40 million directly from government measures to encourage academic success among young people
- $50 million for sports facilities
- $100 million for environmentally responsible educational facilities
Health and social services
Health was noticeably underplayed in the budget. Apart from a recap of the reforms involving restructuring, access to services and patient-focused funding, few specific mentions were made relating to this important portfolio.
- $60 million to improve home care for seniors
- $15 million to surgery to improve access, particularly to day surgery, and to reduce waiting lists
- $6 million for detox centres
- $2 million to promote a healthy lifestyle and implement a preventative health policy
Health spending will increase by 2.4% in 2016-2017 and 2017-2018, and by 2.8% in 2018-2019. By comparison, the increase in education spending will be 3% for the government’s next three fiscal years.
Childcare and the health contribution to relieve the burden on taxpayers
Quebec uses the health contribution and the additional contribution for childcare expenses to relieve the burden on taxpayers.
Health contribution: The budget announces an immediate reduction in the health contribution and its complete elimination in 2018:
As of 2016, the maximum amount for the health contribution for the first two tax brackets will be reduced for 4.3 million taxpayers as follows:
- From $100 to $50 for the first tax bracket, i.e., income of $41,265 or less
- From $200 to $175 for the second tax bracket, i.e., income between $41,265 and $134,095
In 2017, the health contribution will be eliminated as planned for taxpayers with lower income. In addition, a further $55 off the maximum amount for the second tax bracket will be granted to the middle class. Given that the health contribution for this tax bracket was expected to decrease from $200 to $125, it will in fact decrease from $175 to $70.
Additional contribution for childcare expenses: Quebec has announced a 50% retroactive reduction in the additional contribution for a second child attending subsidized childcare. This reduction applies to the year 2015:
- The maximum rate will be $13.65 for a second child as of 2015, and $14.13 for next year. For a family with an income of $100,000, this could mean savings of $292.
Businesses and Economic Measures
Here are the main economic measures for businesses mentioned in the budget.
- Businesses in the manufacturing and resource processing industries will be able to benefit from reduced electricity rates of up to 20% over four years. The reduced rate will be applicable to businesses billed the L Rate (Large-power rate) as attributed by the Régie de l’énergie (around 150 large businesses).
- Quebec is establishing a reduction for innovative businesses starting on January 1, 2017, allowing manufacturing businesses that are marketing a product with a patent protecting an invention developed in Quebec to benefit from a tax rate reduction on revenue attributable to the patent. The tax rate will be reduced from 11.8% to 4% for revenue attributable to the patent.
- SMEs: SMEs with payrolls of $1 M and under will see their contribution rate to the Health Services Fund gradually reduced from now until 2021:
– 1.6% to %1.45 for SMEs in primary and manufacturing sectors;
– 2.7% to 2% for service and construction sectors.
- An additional $32.5 M in support over three years for small and medium-sized export businesses.
- Tax relief for transfers of family businesses in primary and manufacturing sectors has been brought forward to January 1, 2017.
- A tax credit for expenses related to contracts for integrating management software will now be available:
-To SME in wholesale and retail sectors;
-To SME with consolidated paid-up capital under $50 M, as opposed to $20 M.
- A tax credit for major digital transformation projects to facilitate the transition toward the integration of information technology into business processes will be made available. For salaries incurred under certain employee categories, a 24% rate will apply, under the condition that the project generates at least 500 jobs in Quebec during the first two years of fulfilment of a contract with a minimum 7-year term.
- $70 M has been added for Quebec’s new aerospace strategy, prompting $250 M in government support over the next five years.
- $230 M has been allocated to the forest industry to strengthen competitiveness and development, and to increase private forest contributions to broaden industry supply.
- Over the next five years, $45 M will be put toward developing the agri-food industry (farming exports, food-processing research, implementing best agricultural practices, positioning Quebec alcohol industry, oversight of Quebec’s alcoholic beverage industry).
- $65 M will be allocated to implement three technology startup funds (life sciences, startup funds for innovative businesses targeting export markets, clean technologies).
- The nature of the Green Fund’s management reform is detailed.
- Following the debate on feminism, Quebec is in the process of implementing a Government Action Plan on Gender Equality 2016-2021 ($3 M).
- A $128 M investment in building 1,500 new public, community and affordable housing units starting in 2020.
- Higher work premiums for households without children (+2 percentage points for the general work premium and the adapted work premium).
- The tax shield will be increased from $500 to $3,000 starting in the 2016 taxation year.
- Eligibility age for the tax credit for experienced workers will be lowered to 62 starting in 2018 (annual surplus work income of $4,000).
- The maritime strategy and Plan nord have become secondary.
And to end on a lighter note: motorists will soon be able to opt for a personalized license plate with the alphanumeric sequence of their choice, thus helping to increase the SAAQ’s revenues by $5 M per year.
Copyright © 2016 TACT Intelligence-conseil, All rights reserved.