Québec's latest budget forecasts a deficit of $11 billion, the largest in the province's history. For a government that calls itself the government of the economy, that's a lot. If the government is to maintain its reputation as good economic managers, steps must be taken to deal with this situation.
With a strong record on regulatory relief, the government is now turning to a review of tax credits to save on spending and limit its intervention in sectors that are no longer struggling. Québec will maintain an interventionist approach to the economy, but intends to ease off a little.
The first tax credits to be affected will be those for the video game and multimedia industries, with reductions that took effect in May. Introduced some 20 years ago, these sums are now used mainly to pay salaries and boost profits. The context of this industry has also changed since the pandemic, and designers have less and less need to be located in physical offices.
Other tax credits related to office space and maintenance could also be reviewed, especially as the government is helping companies to prioritize telecommuting as well. This could have a negative impact on the already ailing commercial real estate sector. Tax benefits for the purchase of electric vehicles and the maintenance of heavy vehicles could also be on the chopping block.
For the moment, the government's timetable remains unclear, but should become clearer over the coming months. If it undertakes a real review of tax credits, Québec will have a vast playground. Over the past 40 years, successive governments have always preferred to keep taxes high, and then choose sectors and confer financial advantages on them, including through taxation. The promised revision would be a departure from this model. In the long term, we hope that the review will result in lower corporate taxes, especially for small and medium-sized businesses, which are among the most heavily taxed in North America.
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