March 2008

A budget for hard times

No matter how hard we look, the Quebec Finance Minister’s budget tabled on March 13th contains very little that will directly impact our tax returns. With a few exceptions, of course.

By tabling a budget that she called prudent and disciplined, Minister Monique Jérôme-Forget attempted to reach two main objectives: breathe some life into a somewhat lackluster economy and adapt the public finances to an environment that is more binding than in previous years. The result is a more economically oriented and less tax-related budget, with few measures likely to have an immediate impact on the personal finances of a great many Quebec households.

Welcome to a new budgetary era.

And the winners are …
Three groups of individuals come out winners:

  • Parents who use unsubsidized day care
  • Seniors
  • People who act as informal caregivers

First noteworthy measure: the tax credit for unsubsidized child care expenses has been substantially increased, rising to 60% for several income brackets. It’s parents with a family income in the $80,000 bracket that will benefit most since, until now, they had a tax credit of only 31%. The benefits for everyone else vary, as shown in the table below. In general, the increased credit means that, from now on, unsubsidized day care will cost the same as subsidized services.

Childcare tax credit: savings vary according to income

Family income

Previous rate

New rate

Yearly savings





























$100,550 and over




Source: Ernst & Young

As well, the budget contains two items of interest to seniors. One, the maximum tax credit for retirement income will rise from $1,500 to $2,000 over two years. Approximately 400,000 people are affected by this measure, but, in the end, we’re only talking about $100 or so a year.  Next, the tax credit for home support is also increasing from 25% to 30% and the tax-credit program has been simplified. Note that this measure is accompanied by an $80 million injection into the health sector to promote home support.

Finally, informal caregivers can look forward to a new refundable tax credit of 30% to cover part of the expenses incurred to obtain replacement help. In another connection, note that the tax credits for infertility treatments and adoption expenses have been increased from 30% to 50%.

TFSA: in Quebec as well

Everyone expected it, but still, we should mention that Quebec has decided to go along with the federal Tax-Free Savings Account recently introduced in the Flaherty budget. A number of other measures have also been harmonized, notably the 10-year extension of RESP lifetime and contribution periods, and the adjustment of the dividend tax credit.

For companies

If the budget doesn’t include very many goodies for individual taxpayers, it’s because the government is giving a welcome break to businesses that need some backup to help them ride out the economic slowdown.  

Owners of small and medium-size businesses will be encouraged by a series of measures aimed at stimulating business investment and worker training:

  • The immediate, complete elimination of the capital tax for manufacturing companies (the manufacturing sector includes around 14,300 companies; for all other economic sectors, the capital tax will be phased out by the end of 2010).
  • A three-year extension, as at the Federal level, of the accelerated depreciation rules for the purchase of processing and manufacturing equipment. In an effort to boost environmental technologies, the accelerated depreciation rules will now apply to geothermic pumping systems and systems used to convert waste into energy as well.
  • A 5% investment tax credit for the purchase of manufacturing and processing equipment. Note that this credit will be higher for regional businesses, reaching as much as 40%, for example, in the Gaspésie–Îles-de-la-Madeleine, Côte-Nord, Abitibi-Témiscamingue and Nord-du-Québec regions.
  • A refundable tax credit of 30% for IT companies (this credit applies to employee salaries associated with innovation-driven work).
  • Finally, the government is investing $150 million to develop vocational and technical training, and more than $196 million in the Employment Pact, which also targets worker training and helps the unemployed acquire new skills. An investment of $250 million in Quebec universities has also been announced.

And lastly…

What else? Cottage owners and remote businesses rejoice! The Connecting Rural Communities program (Communautés rurales branchées) will soon be bringing high-speed Internet access to all regions of Quebec.