blog

Quebec Minister of Finance Éric Girard tabled his second budget on March 10. A budget with the COVID-19 crisis and spectacularly volatile financial markets as a backdrop.

March 10, 2020

The 2020-2021 budget tabled by the Minister of Finance follows in the path of his previous one, notably with regard to significant budgetary surpluses. A favorable situation that, according to Mr. Girard, gives the Province some leeway to support the economy should it be affected by the current global situation.

In addition to the issue of the budgetary balance, this budget contains a number of measures aimed at individuals and entrepreneurs. Here are the most noteworthy.

1. As in the first Girard budget, there are no income or consumer tax reductions this year. On the other hand, the government confirms its intention to standardize school tax rates, which could provide new savings for some taxpayers starting in July. For example, according to the government’s figures, the owner of a home in Montreal worth $275,000 would save $182 compared to 2018. For the same home located in Mauricie or Saguenay–Lac-Saint-Jean, the school tax reduction would be $509.
2. As well, people who are caregivers will want to note the introduction of the refundable tax credit for caregivers, which replaces the “refundable tax credit for informal caregivers of persons of full age.” The new program has two components and can provide up to $2,500 per year in support.
3. The same goes for the parents of severely handicapped children. The budget provides for additional support amounting to $150 million over five years. Another measure that could make a difference: a parent can take a career break of 18 years to care for an eligible handicapped child, and this period will be excluded when determining the pension payable under the Quebec Pension Plan. Previously, the maximum exclusion period was seven years.
4. In a similar vein, the government also wants to use a reduction in payroll taxes to encourage businesses to hire people with a severely limited capacity for employment. To achieve this, the budget provides for tax relief of close to $14 million over the next five years.
5. With regard to more general economic measures, the Quebec Infrastructure Plan totaling $130 billion over 10 years (an increase of $1.5 billion per year compared to the last budget) is one of the most noteworthy expenditures in this budget. If your company is active in public infrastructure construction or renovation, this news will probably interest you.
6. The budget also includes spending in the area of climate change, particularly with respect to the electrification of transportation. At the individual level, provisions notably include the continuation of the Roulez vert program, which provides financial assistance of up to $8,000 on the purchase of an electric vehicle. The Chauffez vert program aimed at residential heating will also continue.
7. If you are an entrepreneur, you will no doubt want to familiarize yourself with several measures aimed at supporting your investments. The first is the introduction of the investment and innovation tax credit, known as “C3i.” This credit will apply to acquisitions of manufacturing and processing equipment, computer hardware, and management software packages, and the benefit can be as high as 20% of eligible investments. Note that the tax credit rate will vary depending on the region where the investments are made, and that the tax credit for the integration of IT in SMBs will be abolished at the same time.
8. Another new measure for innovative companies: the incentive deduction for the commercialization of innovations (IDCI). If you own the intellectual property and incurred R&D expenses in Quebec for an asset you commercialize in the province – software, for example –, the revenue generated could now be taxed at an effective rate of 2.0%. That’s a 9.5% reduction compared to the general rate.
9. If you are looking for investors to support the growth of your SMB and your business is in an innovative sector such as green tech, life sciences or artificial intelligence, the new synergy capital tax credit could foster ties between your company and firms wishing to invest in it.
10. If you are an entrepreneur in the cultural sector, especially music, you will probably want to learn more about the new and improved measures announced in the budget, which provides close to $457 million in additional investment over six years.
11. Finally, is your company active in the maritime transport industry? The budget announces a new iteration of the government’s Maritime Strategy, with a budget of $300 million. Of course, this is only a brief overview.

For more information, feel free to read the documentation published by the Ministère de Finances! You will find it here. , You will be redirected to an external website.

Sources Actualis

The following sources were used to prepare this article.

Ministère des Finances du Québec, Budget 2020-2021. , You will be redirected to an external website.
Finance et Investissement, Budget 2020. , You will be redirected to an external website.
Radio-Canada, Budget du Québec 2020. , You will be redirected to an external website.

Five key indicators to monitor what to expect from the year ahead.

It’s always risky to make economic predictions at the beginning of the year. Be that as it may, it could be useful to keep an eye on certain indicators with the potential to anticipate, or at least explain, the behaviour of the economy.

The following five indicators are among those most frequently cited by economists.

Growth

It’s the great paradox of 2019: while stock markets, for the most part, were generating outstanding returns, the rate of economic growth slowed somewhat worldwide. In fact, this trend has been entrenched for the past ten years or so, but the International Monetary Fund is now expecting a slight improvement at the global level in 2020. That said, even though a slowdown mustn’t be confused with a recession, many experts are keeping close tabs on the growth outlook in developed countries, which is looking to remain as sluggish as it was in 2019.

Stock markets

As mentioned above, stock market performance, generally speaking, was spectacular in 2019. From January 1 to December 31, the MSCI World Index was up by almost 24%, Canada’s S&P/TSX Index by more than 19%, and the S&P 500 in the U.S. by close to 29%. Globally, these are the best returns in 10 years. At the time of this writing, in early January, this upward trend seems to be holding, despite deterioration of the situation between the United States and Iran. For the rest of the year, though, a repeat of 2019 is not widely anticipated by experts, especially given that stock prices have risen so high. However, many remain optimistic, although Trading Economics is forecasting price declines in most markets.

Debt and interest rates

At the global level, government, corporate and household debt have climbed to record levels. This would be due in large part to the monetary policies of the central banks. By keeping interest rates very low (and most having announced their intention to hold to this course), they facilitate access to credit. The World Bank, itself a major lender, has expressed concern about this situation, especially for emerging economies, which would be more vulnerable to a future financial market crisis or the effects of a trade war. In Canada, however, the federal government, which plans to continue generating deficits until further notice, regards the debt-to-GDP ratio as still within acceptable limits.

Real estate

In its 2020 Economic Outlook, the BDC predicts a rebound in the real estate market, and this, along with residential investment and household consumption, should benefit Canadian entrepreneurs. In fact, despite global uncertainty and ongoing weakness in business investments, experts expect that household consumption will continue to buoy the economy and that the real estate market, which experienced slower growth in 2019, will gain ground. This view would be partially confirmed by the experts of the Teranet and National Bank House Price Index, who reported in December that the housing market would have some momentum going into 2020.

The geopolitical situation

Finally, the geopolitical situation is a major uncertainty factor in 2020. The outcome of the U.S. elections, President Trump’s impeachment hearing, the trade wars being waged by the U.S., especially with China, Brexit, political tensions and even military conflicts (notably with Iran), are all unknowns that could have an impact on the economy and the markets. On top of that, the economic effects of climate change and water scarcity are increasingly becoming part of the conversation. The World Bank figures that in some countries water shortages are reducing economic growth by more than 30%. Some experts are beginning to reflect on how this situation might possibly affect economic sectors that rely on high water consumption.