Uncertain economic times provide the backdrop for the Quebec government’s most recent budget, the fifth under Finance Minister Éric Girard. The inflation rate, at 5.2%, is still high, although it has pulled back from the peak of 8.1% recorded last June. Consumers’ borrowing costs are at levels not seen for decades, with the Bank of Canada’s key interest rate increasing to 4.5% from just 0.5% a year ago. And a growing number of economists are predicting that a recession is likely by the end of the year.
In response to this situation, the new budget includes a tax cut intended to provide some relief to Quebec households, but which, on the other hand, will cost the government about $1.7 billion a year. Overall, the government expects to end this budget year with a deficit of about $4 billion, and anticipates that fiscal balance will be restored by 2027-2028.
Here’s what the impact of the tax cut will be, depending on your income, along with a summary of eight other key elements of the latest Girard budget, from a personal finance perspective.
1. A tax cut of $370 on average
To decrease the tax bill for a majority of taxpayers, the government will reduce the tax rate for the two lowest tax brackets by 1% starting in the 2023 tax year. For the lowest bracket (taxable income of $49,275 or less), the rate will drop from 15% to 14%, and for the second bracket (taxable income of $49,275 to $98,540), it will go from 20% to 19%. The result? An average tax saving of $370 per taxpayer. In reality, though, the higher your income, the more you will benefit. For example, if your annual taxable income is $50,000, your tax cut will be $328. If your annual taxable income is $70,000, your tax cut will be $528. And with $100,000 or more in annual taxable income, you will get the maximum tax cut of $814 per year.
This tax relief will apply to about 4.6 million Quebecers. However, given that it’s a tax cut, those who don’t have taxes to pay obviously won’t be able to benefit. That said, it’s worth mentioning that the “housing” component of the solidarity tax credit for low-income individuals will be enhanced to provide an additional amount of up to $126 for a couple with two children.
2. More flexibility for pensioners who want to continue working
Changes in the works for the Quebec Pension Plan (QPP) will potentially enhance the income of retired people and, at the same time, help ease the labour shortage. First, the maximum age to apply for QPP benefits will increase from 70 to 72, so benefits will have two extra years to rise in value (remember that your QPP benefits grow by 0.7% for each month after your 65th birthday if you don’t apply until later). Moreover, if you want to continue working (or return to work) post-retirement, QPP contributions will be optional after age 65. There will also be a safeguard in place to ensure that you are not disadvantaged in terms of your pension calculation if your employment income is lower than it was during your career.
Be careful though! These changes won’t come into force until January 1, 2024.
3. Labour shortage: $615 million over six years
If you’re an entrepreneur and face the daily challenges posed by the labour shortage, note that the government is planning to spend over $100 million a year to attract, train and retain workers for the benefit of Quebec businesses. Most of this amount, about $509 million, will be used to recruit immigrant workers, notably by helping them by means of regional integration, French-language learning, and recognition of their professional credentials. Funds will also be provided to support businesses in their search for the workers they need.
4. Transparency requirements for businesses
Again if you are an entrepreneur, you might want to take note of the new measures that will now require businesses to disclose their “ultimate beneficiaries.” These measures are intended to prevent strategies that, by allowing a company’s ultimate beneficiaries to be concealed, enable tax evasion, tax avoidance, money laundering and the financing of criminal activities.
5. Changes in the conditions for “tax-advantaged funds”
Investors who do or would like to include so-called tax-advantaged funds, such as labour-sponsored funds, in their portfolios, may want to talk to their advisors in order to be clear on the new rules that will soon apply to this type of financial vehicle. Among other measures, the Girard budget provides for changes to the minimum holding period and to eligibility for the tax credit associated with these funds.
6. $5.6 billion more for health care
If you work in the health and social services sector, or if you are one of the many people who use the health system, you will no doubt be interested to learn that an additional $5.6 billion will be invested in this area by 2027-2028 to support the Ministère de la Santé et des Services sociaux’s “health plan.” Of this amount, $2.2 billion has been earmarked to sustain the vaccination and screening centres set up during the pandemic and expand their reach to additional services. About $60 million will be set aside to create Santé Québec, which will be responsible for making the system more efficient, and $146 million will be used to develop the “Votre santé” platform to facilitate appointment booking. As for mental health care, the budget provides an investment of $565 million over five years. Note that health and social services will be receiving an injection of $1 billion starting this year.
Furthermore, still in the area of health care, the Girard budget sets aside almost $125 million over five years to implement free access to the vaccination against shingles, a viral infection that causes severe pain. This measure, which should benefit 800,000 people, will come into force this year. Details have yet to be released.
7. $2.4 billion for the environment
Car-owners planning to change their tires might notice the $4.50 “environmental duty” that will apply to new tires as of July 1 (it was previously $3.00). However, most of the attention will go to the $2.4 billion for environmental measures. Over five years, this money will be devoted to fighting climate change and protecting biodiversity and water resources. Specifically, these investments will help support the creation of the Fonds bleu announced in 2022, which will be partly funded by the charges payable for water use.
8. $2.3 billion for youth
Do you have school-age children? You might be happy to know that the government is planning to invest $2.3 billion over five years to develop the potential of youth. This money will be used to help youth succeed by increasing the resources for student retention and success, improving the performance of the school system, making vocational training more attractive and accelerating the maintenance of the school building inventory.
9. Is an automatic tax return on the way?
Finally, if you take care of a vulnerable person who nonetheless has to file a tax return every year, you might want to keep a close eye on a pilot project announced in the budget. Under this initiative, some 25,000 vulnerable people with a simple tax profile will receive their 2023 tax returns automatically pre-filled by the Ministère du Revenu. The completed forms will arrive next spring, ready for the taxpayer to approve and sign. The main aim of this project is to ensure that the most vulnerable taxpayers receive all the assistance measures they are entitled to, but which they may sometimes neglect to apply for.
Clearly this is just a quick overview of the 2023-2024 budget tabled by the Quebec government. Depending on your situation, you may want to learn more about, for example, the measures associated with housing construction, or the expansion of 5G connectivity in regional areas.
For all the details, you can check out the documentation released by the Ministère des Finances, which you will find here. And feel free to reach out to your advisor, as well, who can throw more light on this subject as well as any other financial matters.
The following sources were used to prepare this article.
Banque de données des statistiques officielles sur le Québec, “Indice des prix à la consommation (IPC), indice d'ensemble, Canada, Québec, RMR de Montréal et RMR de Québec, données mensuelles non désaisonnalisées.”
Finance et investissement, “Les nouvelles limitations des fonds fiscalisés.”
La Presse, “L’inflation s’éloigne, la récession se rapproche”; “Une baisse d’impôt moyenne de 370 $”; “Budget du Québec: six choses à savoir”; “Les brèves du budget” ; ; « Un milliard par année pour le Plan santé.»
Le Devoir, “Les mesures du budget qui affecteront votre portefeuille”; “Plus de 2 milliards de dollars pour développer le «potentiel des jeunes.”
Les affaires, “Québec dépense 2,4 G$ pour protéger l’environnement”; “Connectivité: amener le réseau 5G aux régions”; “Presque rien pour améliorer l’offre sur le marché immobilier.”
Ministère des Finances du Québec, Budget 2023-2024.
Radio-Canada, “L’inflation s’est établie à 5,2 % en février au Canada”; “Québec concrétise la baisse d’impôt dans son budget 2023”; “Pas de mesure phare contre la crise du logement et la pénurie de main-d’œuvre.”
Retraite Québec, “What you need to know before applying for your retirement pension paid under the Québec Pension Plan.”
Wowa, “Bank of Canada Meeting Schedule for 2023.”