NATIONAL Bulletin

Highlights of the 2016 Quebec Government Budget

In this latest NATIONAL Bulletin, our Quebec City colleague Yvan Loubier, Economist and Director of Major Projects, offers a detailed analysis of the 2016 Budget presented by Minister Leitao yesterday.
 

FINANCIAL AND ECONOMIC DATA OF THE 2016 BUDGET

A balanced budget will be reached in 2015-2016 and the current budget consolidates the maintenance of the balance next year. In fact, the year 2015-2016 will see a $1.4 billion surplus. The debt/GDP ratio will begin to decline starting March 31, 2016

In 2016, the Quebec government’s consolidated revenue will be $102.6 billion and will finance:

  • Government mission expenses ($89.7 billion)
  • Servicing the debt ($10.4 billion)
  • Appropriation for contingencies ($400 million)
  • Payments to the Generations Fund ($2 billion)

Real GDP should grow by 1.5% in 2016 and 1.6% in 2017. The falling Canadian dollar and growing American economy have a positive effect on the performance of Quebec’s economy.
 

TAX RELIEF AND CREDIT ENHANCEMENTS

INDIVIDUALS

  • The budget provides for: an immediate reduction in the health contribution and its total abolition in 2018. This will reduce the tax burden by $509 million. Over the next five years, the tax burden on individuals will be reduced by $4 billion.
  • A 50% reduction in the childcare rate for a second child.
  • Establishment of a strategy for the equality of women and men, prevention of sexual violence and increased tax credit for donations, for overall support amounting to $185 million over five years.
  • A tax credit amounting to 20% of eco-responsible home improvement expenses (RénoVert).

BUSINESSES

  • The budget provides for a 50% reduction in the to the Health Services Fund contribution by primary and manufacturing sector SMEs, and a 25% reduction for the construction and service sectors, for a total of $245 million from this measure. In all, the tax burden on businesses will be reduced by $380 million between now and 2020.
  • A $135 million tax reduction for innovative companies.
  • Tax relief in business transfer cases.
     

STIMULATING PRIVATE INVESTMENT AND DEVELOPMENT INITIATIVES

  • The budget provides for $2.3 billion worth of measures over the next five years to promote economic development across all regions throughout Quebec.
  • Hydro-Québec’s rates in the sectors of manufacturing and the processing of natural resources: the budget provides for a decrease of up to 20% in the price of electricity for four years which would allow for a refund equivalent to 40% of eligible investments in the company. This measure could result in $2.6 billion in investments between now and 2021.
  • An additional reduction in electricity rates corresponding to 10% of the investment for GHG reduction. For example, this could lead to a 50% refund of investments for businesses that reduce their GHG emissions by 20%.
  • The new electricity discount complements the economic development tariff (L-20).
  • To stimulate investment into innovative manufacturing and promote retention of intellectual property developed in Quebec, the budget announces a reduction from 11.8% to 4% in the tax rate on income attributable to a patent (deduction for innovative businesses). This represents $135 million in tax cuts for innovative businesses.
  • The budget provides for $32.5 million over three years to support high tech SMEs exporting innovative products or processes.
  • IT in business: additional $78.5 million in credits over five years to finance the seed phase of digital strategy initiatives; greater tax credit for integrating IT into SMEs and support for major digital transformation projects. In all, $162 million will be set aside for these initiatives.
  • The budget allots another $70 million to the aerospace sector to support growth, diversify and stimulate innovation.
  • The budget will devote $44.9 million over the next five years and increase the Teralys Fund by $96 million to promote the startup and growth of innovative businesses. It also announces increased tax support for Quebec businesses and extension of local Funds for the purpose.
  • Life sciences: the budget provides for $33.8 million for the marketing of Quebec discoveries, early clinical studies, support for the Montreal Institute of Clinical Research, implementing the new life sciences initiation fund, and increased capitalization for the Teralys Capital Fund for innovation. The budget also announces that henceforth the Institut national d’excellence en santé et en services sociaux (INESSS) can begin evaluating a medicine or a new indication for a medicine already on the market before Health Canada renders a decision.
  • $230 million is devoted to the forestry sector to foster its competitiveness and increase supply from private forests to industry.
  • The budget includes $150 million in governmental interventions to support the tourism sector, including $90 million in support to develop winter, culture, event and adventure-based tourism, and $30.9 million toward the SÉPAQ and Quebec’s built-up heritage.
  • $5 million support for agri-food to support exports.
     

FINANCIAL SECTOR

  • The budget provides for the filing of a Bill to revise the body of law governing the financial sector. This reform is intended to create an integrated, consistent and effective framework that promotes the interests of the Quebec public and lightens the regulatory burden.
     

THE PLAN NORD

  • The Plan Nord Fund will invest $450 million into the Société du Plan Nord over the next five years, including nearly $175 million this year.
  • The budget will support five structuring projects that have already been identified: installation of a conveyor to link existing infrastructure (multi-user dock in Pointe-Noire), a call for projects in hydrometallurgy, a renewable energy project, a feasibility study for a permanent communications network in Nunavik and road infrastructures (138-139 and the James Bay road).
  • Enhanced tax assistance for exploration in difficult-to-access areas (25%).
  • Accelerated mining site restoration projects to maintain mining jobs despite an unfavourable cycle.
     

DEVELOPING A GREENER ECONOMY

  • The budget provides for actions in many areas, including contaminated ground rehabilitation, promoting transport electrification, innovation in green technology, and university research. The government will allot $100 million over five years, and will also provide support through Hydro-Québec for mass transit companies and government-designated organizations. The Caisse de dépôt et placement will also be enlisted to contribute.
  • Establishment of new financial support for businesses to apply environmental technologies related to ground decontamination ($2 million).
     

CULTURE AND FILM AND TV PRODUCTION

  • Enhance the cultural programs targeting 4 to 11-year-olds by adding another $5 million to support creators.
  • Focus on development and promotion of the French language ($3 million).
  • $3.8 million in additional tax assistance over five years resulting from changes to the tax credit criteria for film and TV production (prime time and youth productions).
     

IMPROVE LABOUR MARKET CONDITIONS

  • A series of initiatives totaling $310 million over five years targeting labour market participation to meet pressing needs of businesses. It is especially a matter of reducing the age of eligibility for the tax credit for experienced workers to 62.
     

THE EDUCATION SECTOR

  • $500 million over three years will go to school performance, including $300 million to combat the dropout problem, $120 million for scholarly success and $80 million for school-business networking to better address the needs of the labour market.
  • $700 million to be invested into education and higher education infrastructures to improve learning environments, sports facilities and make the establishments more environmentally responsible.
     

SOCIAL HOUSING

  • A $128 million investment to build 1,500 new affordable social and community housing dwelling units.