Ottawa, May 2, 2016 - Quebec has the highest provincial net business and personal tax burden, according to a new Conference Board of Canada report,
Benchmarking Provincial Tax Burdens.
[h=3]Highlights[/h]
- The provincial personal tax burden in all major income brackets is higher in Quebec than anywhere else in Canada, and sales taxes add to the personal tax burden.
- Quebec had the highest provincial net business tax burden ratio.
- Payroll taxes paid by employers contribute significantly to the gap in provincial business tax burdens between Quebec and the other provinces.
This report compares the provincial tax burden on businesses and individuals among provinces based on the calculation of average provincial tax burden ratios.
The analysis is based on data through 2011 for business taxation and 2012 for personal taxation (which were the most recent data available at the time this research was completed).
"The implicit personal income tax rate in Quebec is higher than in all other provinces at all major levels of income," said Julie Adès, Senior Economist. "In terms of business taxation, relatively high corporate income taxes and payroll taxes contribute to the large burden on Quebec businesses."
Quebec had the highest provincial net business tax burden ratio for each year during the 2008–11 period that the analysis covered. In terms of corporate income tax, Quebec has a relatively competitive rate of taxation, but the rate for small business (8 per cent) is the highest among the provinces. The Quebec government lowered its tax rate on income eligible for the small business deduction from 8 to 6 per cent in June 2014 and from 6 to 4 per cent in April 2015 for businesses in the manufacturing sector. Also, in its 2015–16 budget the Quebec government announced a reduction of the tax rate from 8 to 4 per cent for businesses in the primary sector for fiscal years starting after December 31, 2016.
Corporate income taxes provide only a partial picture of the taxes levied on businesses. Payroll taxes contribute significantly to the gap in provincial tax burdens between Quebec and the other provinces.
Quebec makes up some ground when sales taxes and provincial subsidies are considered in the comparison. In terms of sales taxes, Quebec businesses have a lower burden than almost all other provinces. Quebec also has comparatively high levels of business subsidies, further narrowing the gap between it and the other provinces.
Just as it does in the business tax burden ranking, Quebec has the highest provincial personal tax burden. Based on the data analyzed, the average tax burden in all major income brackets is higher in Quebec than anywhere else in Canada. Quebec also has one of the highest provincial sales tax burden ratios as a share of household income.
Unlike residents of other provinces, Quebec residents receive a federal tax abatement. Since Quebec is the only province receiving a tax abatement from the federal government, the Conference Board subtracted the value of the abatement from the amount of provincial tax paid by Quebec residents to provide a more accurate interprovincial comparison of provincial tax burden.
This report does not assess the value or quality of goods and services financed by governments through tax revenues. However, it should be noted that Quebecers receive some public services that are not offered elsewhere in Canada, such as a universal child daycare program and comparatively low university tuition for Quebec residents. In addition, Quebec is one of only two provinces (along with British Columbia) to have achieved a balanced budget in 2015–16.
Business taxation includes: provincial corporate income taxes, social security contributions paid by employers, payroll taxes, and property taxes and provincial sales taxes, as well as the provincial segments of the HST.
Personal taxation includes: provincial personal income taxes, social security contributions paid by employees, property taxes, and provincial sales taxes as well as the provincial segments of the HST.
Join Julie Adès and Matthew Stewart for a
live webinar to discuss the findings for all provinces on June 1, 2016 at 2 PM ET.
The report was produced for the
Centre for Tax Analysis, Fiscal Incentives and Competitiveness (TAFIC). Launched in 2014, TAFIC provides Canadian business leaders and policy-makers with credible, leading-edge quantitative research on all aspects of the Canadian system of taxation and fiscal incentives. Using sophisticated econometric tools to measure the impact of proposed reforms on the Canadian economy, TAFIC publishes evidence-based and accessible reports on key issues related to taxation and fiscal incentives.
[h=2]For more information contact[/h]
Corporate Communications
613-526-3280
corpcomm@conferenceboard.ca