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April 03, 2017QUEBEC BUDGET 2017-18 The Province of Quebec introduced its 2017-18 Budget on March 28. Quebec's Budget reports surpluses throughout the fiscal plan through 2021-22. With the exception of a $250 million surplus forecast for 2016-16, the entirety of surpluses are dedicated as payments to Quebec's Generations Fund for retiring the Province's debts.
After posting stronger than expected economic growth and revenues as well as lower debt servicing costs 2016-17, the Quebec Budget includes provisions to refund health contributions for 2016 (for those with incomes under $134,095) and to enhance spending on economic development. For 2017-18, Quebec's revenues are projected to grow by 3.7 per cent while expenditures grow by 3.6 per cent. Over the remainder of the fiscal plan, revenue growth averaging 2.9 per cent outstrips spending growth of 2.5 per cent. This allows the Quebec government greater surpluses to devote to payments into the Generations Fund. Quebec's Budget also includes a $100 million contingency provision in each of the next three fiscal years, rising to $900 million by 2021-22.
Compared with the plan released in the 2016-17 Budget, the latest fiscal plan features higher revenues as well as higher expenditures. Higher revenues are projected based on stronger economic growth, allowing greater expenditures on infrastructure, early childhood programs, post secondary education, health care and economic development as well as a higher basic amount under the personal income tax system.
The government of Quebec has a larger footprint in the provincial economy than observed in most other provinces. However, this also includes some Provincial programs that substitute for Federal programs (for which there is an offsetting reduction in Federal taxes paid by Quebec residents). Over the fiscal planning horizon, Quebec's government revenues as a share of GDP are projected to remain stable at around 26 per cent of GDP. Provincial government spending is projected to decline from 25.6 per cent of GDP to 24.9 per cent; this includes reduced debt servicing costs. Declining expenditures and stable revenues as a share of GDP allows Quebec to increase the share of GDP paid into the Generations Fund.
Quebec's economic growth is expected to accelerate in 2016 and 2017, largely in line with expectations set last year. Quebec's growth is based on rising consumer spending as Quebec households enjoy income growth from rising employment. Quebec's exports are expected to be strengthened as economic growth accelerates in both Canada and the US while nonresidential investments are expected to rebound on major projects such as the Champlain Bridge and the REM transit network around Montreal. Quebec's nominal GDP growth is also expected to accelerate as price growth returns to trend in the medium term and productivity improves in response to demographic changes.
Key Measures and Initiatives
The Quebec Budget for 2017-18 features tax reductions as well as new initiatives to support priority services. In addition to many program enhancements, there are notable tax changes:
- Effective January 1 2017, the Basic Personal Amount allowed under Quebec's personal income tax will increase from $11,635 to $14,890. All other nonrefundable tax credits (e.g., age, spousal, pension, impairment) will be increased in proportion to the rise in the Basic Personal Amount. The conversion rate of the Basic Personal Amount and other nonrefundable tax credits will be reduced from 20 per cent to 16 per cent starting in the 2017 taxation year. As a result, the maximum tax reduction from the Basic Personal Amount will rise from $2,327 (20 per cent of $11,635) to $2,382 (16 per cent of $14,890).
- Individuals with incomes of less than $134,095 will receive a refund of health contributions paid in 2016. The health contribution levy is fully eliminated in 2017 (as previously announced).
- The RenoVert tax credit for environmental home improvements is extended for one year.
- To maintain the province's ability to fund programs, Quebec will extend the compensation tax for financial institutions by a further five years to 2022.
- The previously-planned increase of eligibility for age amounts from 65 years to 70 years has been reversed.
Quebec Budget 2017-18
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