Photographer: David Madison/Getty Images

Tax Cuts on the Horizon for Canada's New Fiscal Champion

Updated on
  • Quebec’s premier sees room for tax relief in year to elections
  • Couillard touts talent available in Montreal to attract Amazon

Tax cuts for workers and businesses are looming in Quebec as the provincial government prepares to use its fiscal cushion to give voters relief ahead of planned elections in less than 13 months.

A booming economy and a vibrant job market are putting Canada’s second-most populous province on track to post a third-consecutive year of budget surpluses. Premier Philippe Couillard indicated he’s ready to turn on the stimulus taps further to lower a level of taxation he sees as a hurdle to economic growth and investment.

“We will do this after we make sure that we have at least a medium-term horizon on education and health-care funding,” Couillard said in an interview Monday at Bloomberg’s headquarters in New York. “Still, I think we will have room to add more tax relief.”

Quebec’s economy is firing on all cylinders, with an unemployment rate of 6.1 percent hovering near all-time lows and companies desperate for workers in some sectors. After ranking among Canada’s fiscal laggards for years, the budget discipline under Couillard won the province an S&P Global Ratings upgrade in June, pushing its credit rating above that of Ontario for the first time. Yet a re-election is not guaranteed for Couillard’s Liberals next October as a recent poll shows the two main rival parties closely behind.

“Quebeckers in general see the change that has happened; they also need to see even more that it translates in a direct impact, a positive impact in their lives,” he said when asked about polls and the upcoming election campaign. “We will still keep showing it to them and telling them ‘look I think we believe that life is better, but could be even more.”

Quebec posted a preliminary surplus of C$2.49 billion ($2 billion) for the fiscal year ended March 31, and early signs point to a repeat performance in fiscal 2017-18.

Budget Cushion

“I would say we have already built a good buttress in terms of surpluses two
years in a row, and we will see what this year will bring,” Couillard said. “We see encouraging trends, and the same thing could repeat itself.”

Tax relief was provided in the latest budget in March, which raised the basic personal tax threshold and refunded a provincial health tax to most families. Couillard said additional cuts could benefit both individuals and small businesses, and wouldn’t necessarily have to be announced at the time of the next budget.

As the Canadian province shifts to a services economy, attracting investment from the likes of Facebook Inc. and Alphabet Inc.’s Google, Couillard recognized that corporate investment remains sluggish. Given the uncertainties surrounding the free-trade agreement with the U.S. and Mexico, Quebec is seeing new export opportunities from a trade pact with the European Union, and is helping companies invest in advanced manufacturing to withstand shocks, including the appreciation of the Canadian dollar.

“In making our manufacturing industry --which is coming back now-- much more productive, much more automated, much more intelligent, I think we in a way are hedging ourselves against significant variations in the exchange rate,” he said.

Amazon HQ

Quebec will also back a bid by Montreal -- the province’s largest city -- to lure Inc.’s second corporate headquarters, Couillard said. Cheap power, declining corporate tax rates and the presence of four universities all play in Montreal’s favor, he said. Toronto, Canada’s largest city, has already announced its intention to compete for Amazon’s new site and multiple U.S. and Canadian cities are also in the race.

“My main pitch for Amazon is talent,” Couillard said. “We have the second-largest concentration of university students in North America after Boston, tremendous activity in startups, the digital economy, animation and special effects. That’s my pitch.”

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