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Québec Budget 2022-2023: Measures for a Wide Range of Sectors, Too Little to Address the Labour Shortage
True to form, a team of Raymond Chabot Grant Thornton experts released its Tax Bulletin, which reports on the tax measures contained in the Québec budget tabled by Québec Finance Minister, Éric Girard on March 22, 2022.
Our firm is taking this opportunity to present its observations regarding this fourth and final budget tabled by the CAQ government before the fall general election. This pre-election budget is presented in the context of an “almost” post-pandemic situation, where the effects of inflation, the war in Ukraine or a 6th wave of the pandemic could adversely affect a financial outlook that is currently based on a solid economy and sound budget planning.
It should be noted that according to the current financial framework, a balanced budget, in the accounting sense, that is without a contribution to the Generations Fund, would be achieved by 2023-2024. After payment to the Generations Fund, the 2023-2024 year would end with a budget deficit of $3.9 billion and a return to a balanced budget would still be maintained for 2027-2028.
Promoting growth by taking action on several fronts with limited measures to counteract inflation
Raymond Chabot Grant Thornton recognizes that this budget targets numerous activity sectors. “Health, education, tourism, culture, regional development, environment, community, there are numerous groups that will benefit from this budget,” says Regional Vice-President and National Business Transfer Leader for the firm, Éric Dufour.
Tax Partner, Jean-Pierre Poulin, says that “The firm applauds the implementation of the new Québec research and innovation strategy, with an envelope of $1.3 billion; the one-year extension of the enhanced investment and innovation tax credit, C3i, representing an investment of $156 million; and the significant support for the tourism and culture sectors, which have been hard hit by the pandemic, amounting to $304 million over six years and $258 million over five years respectively.”
As for the $3.2 billion investment to reduce inflation pressure among 6.4 million Québec adults with an income of less than $100,000, “this can help offset the impact of inflation on personal and household finances to a very limited extent. Nevertheless, other actions are still needed to better counter the rise in prices, notably through tax or financial measures to encourage savings,” says Tax Partner, Sylvain Gilbert.
The Workforce: A Business’s Lifeline
If there is one common priority for all organizations, it is the workforce issue. Every business leader and entrepreneur has to deal with the challenge of finding talent. Unfortunately, this budget does very little to address this issue. Helping immigrants integrate into the workforce more easily, with a new $290 million envelope, including $12 million over five years to speed up the processing of immigration applications, is good news. Nevertheless, the Québec government must go further, as Raymond Chabot Grant Thornton suggested in its prebudget proposals last February.
For example, in order to encourage experienced workers to continue working or return to work, the firm recommended creating a tax shield with an increase in the tax credit for career extension. Unfortunately, this credit currently only applies to low-income workers. “Additionally, to create a real incentive for experienced workers, the benefits they are entitled to receive upon retirement must not be jeopardized,” says Sylvain Gilbert.
Raymond Chabot Grant Thornton suggested that the rate of the tax credit for career extension should remain at 15%, but that the $5,000 deductible should be abolished and that no reduction of this credit should be applied, regardless of the individual’s taxable income. The firm also proposed that a tax shield be applied if an individual receives Old Age Security or Guaranteed Income Supplement benefits and chooses to work past age 60. This would allow the individual’s social program benefits to be offset by a refundable tax credit in the event of a reduction or loss of these social programs, up to an annual eligible salary increase of $20,000, for example. Such an opportunity should be explored quickly to encourage experienced workers to stay in the workforce longer.
Furthermore, other adjustments are required regarding the contribution by temporary foreign workers to the urgent labour needs of Québec organizations, as the firm noted in its prebudget recommendations.
“If the Québec government wants to further reduce the processing time of applicants attributable to the Temporary Foreign Worker Program (TFWP), then it should no longer require companies to target the foreign candidate before they can undertake the administrative procedures to recruit candidates,” says Marc Audet, President of AURAY Sourcing, specializing in international recruitment and member of Raymond Chabot Grant Thornton.
Unfortunately, the current TFWP process in Québec penalizes our SMEs compared to what is done elsewhere in Canada to recruit a foreign worker. In the rest of Canada, an employer can undertake the procedure without having targeted a candidate (known as an Unnamed LMIA (Labour Market Impact Assessment)), whereas Québec companies must have found the employee before beginning the recruitment process. This requirement means the Québec process takes longer than in other provinces. In the rest of Canada, the foreign recruitment process takes place at the same time as an LMIA application. This can reduce the processing time for the employer by three to four months. Once the Unnamed LMIA is obtained, the employer only has to validate the selected candidates with Service Canada, which takes five to ten days.
Psychological well-being of entrepreneurs and leaders: supporting them on the road to growth
Other than the various measures already announced for the psychological health of Quebecers and workers, including the 2022-2026 interdepartmental action plan on mental health, which we welcome, there is no support for our entrepreneurs and leaders.
While the pandemic may be coming to an end, many leaders are struggling to get back on the road to growth due to the many challenges they have faced or continue to face, such as personal concerns, business issues like cash flow and managing revenues, profits and expenses.
“An assistance program, supported by external experts, that would allow entrepreneurs to obtain a comprehensive business diagnosis to make informed decisions and manage their organizations more effectively, particularly in a period of recovery and changes, should be made available quickly and partially financed by the Québec government,” Éric Dufour stated.