Volume 7, Issue 2

March 17 , 2016

QUEBEC IN THE BLACK - AGAIN

- Second balanced budget in a row has new spending for education, families -

For more information about any of the issues discussed below please contact Adam Daifallah, at (514) 316-7089
or at adaifallah@hatleystrategies.com.

WHAT YOU NEED TO KNOW

Finance Minister Carlos Leito announces balanced budget for 2016-2017
Families with second child in daycare receive fee reduction
Healthcare tax reduced for all but highest income earners
Green home renovations incentivized with tax credit
$1.2 billion more in education spending
$2 billion for Generations Fund to pay down provincial debt

ANALYSIS
Quebec Finance Minister Carlos Leitos third budget, unveiled today, is balanced for the second year in a row. After
two years of belt-tightening, Quebecs Liberal government presented a budget that lacked harsh action. The Premier,
Philippe Couillard, had stated recently that the tough days are behind us, with smooth sailing ahead. The government
focused its attention on putting forward a positive narrative with new spending in the lead up to the 2018 provincial
election. There were no surprises or flashy, big-ticket items. Overall, spending will increase by 2.7% next year, as
opposed to 1.7% this year.
First, families will see some long-awaited tax relief. The provincial health tax contribution will be phased out starting
immediately, with a complete abolition in 2018. Once fully phased out, this will be a $759-million tax savings for
Quebecer taxpayers. Childcare expenses will be reduced by half for parents with a second child in public daycare (CPE):

Volume 7, Issue 2
March 17 , 2016

the daily cost over $7.55 for the second child will be waived, which could save families up to $1,000 a year. Also
announced was an enhancement of whats called the tax shield the measure that ensures that those who see an
increase in income do not see too big of a decrease in tax credit advances. The maxim eligible income is increasing to
$3,000. In addition, starting in 2018, workers aged 62 will be eligible for the tax credit for experienced workers, giving
them tax relief on excess earnings of $4,000 per year.
Another big winner today was education, which had seen funding cuts in the first two years of the Couillard regime.
This time, the government injected $1.2 billion in new spending, including $300-million to fight against dropping out of
school and $700-million in infrastructure upgrades for learning and sports facilities.
The government also announced a green tax credit regime called RnoVert, which will allow up to 20% (up to $10,000
in credit) of eligible expenses for various eco-home renovations like replacing windows to be reimbursed by the
government, for the next year.
There were also goodies for Small and Medium-sized Businesses (SMBs). The government is further reducing the
Health Services Fund contribution for these businesses and in the coming months, the results of a regulatory review
will be announced and administrative costs are set to be further reduced. The government is instituting an innovative
companies deduction (ICD), which will give manufacturing firms that market a product that includes a patent
protecting an invention developed in Qubec a lower tax rate on the revenue attributable to that patent. To
encourage SMBs in manufacturing and primary sectors to integrate high-value added software into their business
process, a 20% tax credit is being offered for fees incurred on contracts awarded for the integration of management
software packages.
The government also had some announcements for the mining sector: To attract investment, the government will
further reduce electricity rates for manufacturing and natural resource businesses. They also said they will spend $630
million over the next five years reclaiming mining sites, and increase the tax credit for resources in the Plan Nord
territory.
Of note: there was very little on the much-vaunted Maritime Strategy, which was a big focus in the previous two
budgets.

For any specific questions please contact: Adam Daifallah, Partner

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