Quebec To Cut Capital Tax By Half By 2007

by Mike Godfrey, Tax-News.com, New York

05 November 2001

In Pauline Marois' 2002/2003 Budget Speech last week, the Quebec Finance Minister announced that the government will cut its rate of tax on capital by half over the next four years.

Quebec's tax on capital is currently the highest in North America, but Ms Marois said that the tax will be incrementally reduced to 0.30 per cent by 2007 from its present rate of 0.64 per cent. 'The tax on capital disparity is already causing serious problems. Large companies may be prompted to move their activities outside Quebec,' she told the provincial legislature.

'These measures will send a very clear message to investors: The Quebec government is making specific commitments to maintaining the competitiveness of its tax system,' she said.

The first planned cut will take effect from January 1, 2003, and the government estimates that around 210,000 small and medium-sized companies, which is 75 percent of all businesses operating in Quebec, will no longer have to pay the tax because the exemption threshold will be raised accordingly.

It is expected that the cut, when fully implemented in 2007, will lose the province C$1.5 billion in revenue. The Finance Minister the government could not introduce the tax cut any sooner because of the C$1.8 billion in revenues it had already lost this financial year in the economic slowdown.

'It was difficult to act today without affecting the budget balance. But our announcement will still affect favorably the decisions taken (by businesses) in the present,' she told reporters.

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