Breaking down the Quebec budget

Some welcome tax reforms, but government intervention in the market isn’t going away

Some other points that occurred to me in the Quebec budget lockup that I didn’t mention in my earlier post:

  • The accumulated deficit in Quebec over 2008-2013 was $10.8 billion. In Ontario, it was $61.9 billion. Just saying.
  • The manufacturing small business corporate tax rate is being reduced to four per cent, roughly comparable with the rates in other provinces. This widening of the gap between the tax rates faced by small and large businesses is unlikely to do much for economic growth. Small business considering expansion plans may be put off by the higher tax rate, and tax data show a significant number of firms whose size puts them just the threshold where the higher rate takes effect.
  • The measures for promoting the maritime ‘Blue Economy’ (ports, shipbuilding and the like) are a surprise—for me, anyway. I’m not sure why this sector is being singled out. Perhaps they’re thinking of a world in which Alberta’s oil is exported to the rest of the world from Montreal? Are they encouraged by the re-launching of the Davie shipyards in Lévis? Or were they just happy to identify a new sector for which they didn’t already have a five-point development plan?
  • The 20 per cent across-the-board reduction in tax expenditures–a saving of almost $500 million by 2016-17–is the first step of an ambitious tax reform program, in the form of the newly-created Taxation Review Committee. The University of Sherbrooke’s Luc Godbout has already been named as chair, so there’s reason to be optimistic that good things will come from it. The committee is supposed to find another $650 million from further tax expenditure reductions, a target that appears to have been plucked out from thin air.
  • The Quebec Model remains intact. In addition to maritime transport, the Liberals are reviving their Plan Nord for resource sector and yet another government-funded ‘venture capital’ fund. There’s little danger that investment decisions in Quebec will be left to the market anytime soon.



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