When You Need To Know About the 2023 Quebec Budget

Overview

Last Tuesday, Quebec Premier François Legault’s government released its fifth budget and the first of its second mandate. With a solid majority in the National Assembly and three and a half years until the next election, Finance Minister Eric Girard focused on the major planks of the CAQ’s campaign promises, highlighted by cuts to income taxes, increases to education and healthcare (Quebec’s two largest expenditures), and a focus on decreasing the cost of living for all residents.

McMillan Vantage Analysis – What to Look for Going Forward in Quebec

While many economists continue to predict an upcoming recession, the CAQ government is betting on growth to slow to ONLY 0.6% in 2023 and increase slightly to 1.4% in 2024. Additionally, Girard is targeting a deficit of $4B for the 2023-2024 fiscal year, followed by an annual reduction of $1.0 billion until reaching fiscal equilibrium in 2027-2028. The plan had previously been to reduce Quebec’s net debt to 30 percent of gross domestic product within the next ten years (it currently stands at 40.2 per cent), but because of the tax cuts announced, that target has now been moved back to 15 years.

Ultimately, the tax cuts will top out at $814 for an individual living alone earning $100K, or a little over $15 per week) but for the 2.2 million Quebecers who earn $49,275 or less, they will save no more than $321, a little over $6 per week.

Many are questioning the merits of the tax cuts at a time where interest rates remain particularly high and while making optimistic assumptions of positive growth for 2023, in exchange for relatively little money going back into the pockets of taxpayers. Beyond the economic benefits, or lack thereof, it is unclear if the CAQ will benefit politically in any significant way. Otherwise, this was not a particularly exciting budget, without many memorable measures. Indeed, the CAQ was able to increase healthcare spending but that was due in large part to a 22 per cent increase to the Canada Health Transfer.

The opposition remains very weak, with the leaderless Quebec Liberal Party (the Official Opposition) sitting at approximately 4% support with Francophone voters in the province, and the two small left wing separatist parties polling in the mid-teens, while the CAQ and Premier Legault remain very popular three and a half years from the next election. It will be worth watching the mood of Quebecers if the economy falters, whether because of a recession or the growing crisis of a labour shortage. For now, the government will remain focussed on stimulating innovation and investment, in particular in critical minerals and anything related to electric vehicles, all the while continuing to play up its nationalist bona fides on issues of language, culture, and immigration.

Budget 2023 Overview – What You Need to Know

$9.2B to lower income taxes over the next five years

• A 1-percent cut on the first two income tax brackets, starting in 2023
  • The first tax bracket will see a decrease from 15% to 14% and the second tax bracket will see a decrease from 20% to 19%.

• A person living alone earning up to $100K will save up to $814 per year

$888M to increase business productivity

• $413M over five years to stimulate private investment to accelerate economic growth, including:
  • Implementing a new tax holiday on revenue and employer contributions to the Health Services Fund for companies that carry out an investment project worth at least $100 million). The focus will be on the following sectors:
    • Agriculture and forestry
    • Extraction of critical and strategic minerals
    • Manufacturing
    • Wholesale and retail trade
    • Transportation and warehousing
    • Information and cultural industries
    • Professional, scientific and technical services
    • Arts, entertainment and recreation
  • Developing industrial land for large-scale projects; and
  • Optimizing the impacts of Québec’s tax-advantaged funds.

• $272.7 million over five years aimed at stepping up efforts in innovation, including:
  • continuing to create innovation zones;
  • promoting innovation in transportation;
  • supporting clean technologies and the circular economy;
  • supporting the life sciences and medical technologies sector;
  • supporting Finance Montréal’s FinTech Station; and
  • promoting the adoption of emerging technologies and practices in the public service.

$615M to address the labour shortage

• $509.6 million over five years aimed at supporting the socioeconomic integration of immigrants
  • increasing support for learning French through the rollout of Francisation Québec;
  • expediting the recognition of immigrants’ credentials;
  • promoting immigration to the regions to meet labour market needs;
  • fostering the attraction and retention of workers, in particular by expediting the processing of foreign worker applications;
  • supporting the regionalization and labour-market integration of refugee protection claimants.

• $105.6 million over six years aimed at supporting businesses in their search for workers
  • supporting in-company training;
  • offering a specialized support service focusing on productivity and labour;
  • addressing labour challenges in the tourism industry.

Other major measures include:

• $3B towards making the health care system more efficient by adapting the sector to post pandemic realities and improving health care services through structural changes;

• $1B towards improving housing affordability;

• $722M towards strengthening the accessibility of transportation networks; and

• $9B over the next five years to fight climate change, with funds being directed towards enhancing the 2030 Plan for a Green Economy and $1.4B in additional funds for the 2023-2028 implementation fund. 

• The 2023-2033 Québec Infrastructure Plan (QIP) has been enhanced by $7.5B over 10 years, to $150B

For help navigating the Quebec government and the upcoming sitting or to discuss this Spotlight, please contact Jonathan Kalles.