Analysis provided by Mercure Conseil
The Budget unveiled by Quebec’s Minister of Finance, titled A Resilient and Confident Quebec, marks the halfway point of the Coalition avenir Québec’s (CAQ) majority government. The first two years of a majority mandate are typically used to implement a government’s flagship and non-consensual policy proposals. However, Premier François Legault’s team has been busy steering the ship amid a pandemic that has turned both political calculations and the province’s fiscal outlook upside down.
The most highly anticipated element of this year’s Budget pertained to the fiscal framework within which Quebec’s economic recovery measures will be inserted. Will the government remain steadfast in its commitment to balance the budget within five years, or will it move the deadline further down the road?
Over the past few weeks, union leaders and the Quebec Council of Employers have shown a united front in recommending that the government overlook its commitment to swiftly balance the budget and instead focus on enhanced investments in Quebec’s economy. In so doing, they have given the government ample room to maneuver as it seeks to chart a path forward.
The Finance Minister indeed chose to give his government more than five years to balance the budget, providing them with more wiggle room to stimulate the economy. This decision was also made easier by the prospect of increased federal healthcare transfers, which would provide Quebec with a window to balance the budget faster than currently forecasted.
The government opted for significant investments in Quebec’s economy, with an eye to innovation, relief for SMEs as well as for economic sectors that have been affected by the health crisis. For example, the cultural and tourism sectors, hard hit by the pandemic, will receive significant additional investments. Infrastructure spending is also at the heart of the government’s plan to bolster Quebec’s economy in the years ahead.
- The government forecasts a balanced budget in 2027-2028. The government will maintain its commitment not to raise taxes.
- The increased spending is mostly dedicated to three areas: health care (5.8% increase), education (4.6% increase) and higher education (8.2% increase). These sums will cover the pay increase of frontline health care workers, increase access to mental health resources and bolster academic achievement.
- SMEs will see their corporate income tax rate go from 4 to 3.2 % for the first $500,000 of taxable income, which will benefit 70,000 businesses. The government will also double the investment and innovation tax credit (C3i).
Mercure Conseil is StrategyCorp’s Quebec-based partner, collaborating on cross-jurisdictional strategic engagements at both the federal and provincial levels.