QUEBEC CITY — Quebec Finance Minister Carlos Leitao has introduced the first provincial budget that will balance the books for the first time in six years.
The zero deficit budget of 2015-16 may help improve the province’s credit rating and lower future borrowing costs but, perhaps more importantly, it’s supposed to help stimulate the economy out of its lethargic growth.
A series of corporate tax cuts and tax shields for individuals are designed to increase private investments, create jobs and put more money into the pockets of Quebecers.
“The economy will be supported by the income available by the pocket of every citizen,” Yves-Thomas Dorval of the Conseil du patronat du Québec told Global News.
“If they don’t have enough income in their pocket they won’t be able to consume to buy products to run the economic growth.”
The tax rate for companies operating in the natural resources sector such as agriculture, forestry and fishing is expected to be cut to four per cent, down from eight per cent.
Corporate taxes are expected to drop to 11.5 per cent from 11.9 per cent.
Payroll taxes are also going down.
Overall, tax relief for corporations will amount to $215 million per year beginning in 2019-2020.
“Owing to this reduction, Quebec businesses will be taxed at the same rate as those of Ontario,”Leitao said in his budget statement.
Individuals will also see tax savings in the form of shields.
Many low income working families will be protected against higher taxes if their salaries increase.
For instance, a couple with one child earning $45,000 will fall in the tax rate of 56 per cent.
But as of 2016 that couple’s tax rate will drop to 45 per cent.
There are also financial incentives to encourage older workers to stay in the labour force and delay retirement for several years.
Many seniors could see tax savings of more than $1,000 a year in the near future.
However, a lot of these measures only come into affect in the next fiscal year.
The president of the Metropolitan Board of Trade of Montreal insists the corporate tax cuts are a move in the right direction.
“This is a budget that will send a signal that we’re looking into how to improve the economy and less so about how to balance the budget,” Michel Leblanc told Global News.
“This is the new phase of our economy now.”
Several market conditions are also benefiting Quebec’s economy.
The lower value of the Canadian dollar is expected to help push Quebec exports up 3.7 per cent this year and declining oil prices are expected to produce up to $1.4 billion in energy bill savings for Quebec consumers in 2015.
The economy is also expected to grow by two per cent.
While the government is poised to balance the budget, the overall debt remains a large problem.
It’s expected to be $190 billion this year, representing 50.7% of the GDP – still the highest debt/GDP ratio in the country.