On March 21, 2023, Minister of Finance Éric Girard presented Québec’s 2023–2024 budget. Titled “A Committed Québec,” the budget provides for significant investments in healthcare and education and includes measures designed to increase business productivity and stimulate sustainable economic growth, address housing affordability, expand transportation networks, promote French language and culture, combat climate change, and reduce debt.
Projecting a deficit of $4 billion, with $1 billion annual deficit reductions planned for the next four years, this year’s budget touts “one of the largest tax cuts in Québec’s history.” This mostly refers to a 1% reduction in personal income tax rates, effective for 2023, for the first two income tax brackets, making good on a promise from the government’s last election campaign. A new 10-year tax holiday for large investment projects (i.e., with eligible expenditures of at least $100 million over 48 months, subject to numerous conditions) has also been proposed.
Several other interesting tax changes were announced in the budget, including the commodity tax measures and tax fairness initiatives summarized below.
Commodity Tax Measures
Increase to Specific Duty on New Tires
To fund the province’s tire recycling program, a specific duty on new tires for road vehicles equal to $3 per tire was introduced on October 1, 1999. Unfortunately, the current specific duty rate will no longer fund the program for 2024 and beyond. To address this funding shortfall and the inequity between the processing cost of different types of tires, effective July 1, 2023, the province will increase the specific duty for new tires with a rim diameter of 62.23 centimetres (24.5 inches) or less as follows:
- $4.50 per new tire with an overall diameter of 83.82 centimetres (33 inches) or less; and
- $6.00 per new tire with an overall diameter greater than 83.82 centimetres (33 inches) but not exceeding 123.19 centimetres (48.5 inches).
The new specific duty rates will apply to new tires acquired through a retail sale or long-term lease, or imported into Québec for purposes other than resale, lease, or installation on a vehicle that is expected to be sold or leased on a long-term basis.
First Nations Tax Exemption Management
The government is proposing five-year funding towards the implementation of a computer system to be part of a program called the Tax Exemption of First Nations from Taxes (TEFNT). The TEFNT is being created to aid in the management of tax exemptions for qualifying First Nations individuals. This new program will be phased in starting on July 1, 2023, and will provide eligible purchasers with a tax exemption at the time of purchase.
Under this program, First Nations individuals will be permitted to purchase alcoholic beverages at a retail reserve location for home consumption without having to pay the specific tax on alcohol. To obtain the exemption at the time of purchase, qualifying First Nations individuals must present a new registration card to be issued by Revenu Québec as well as their federal Certificate of Indian Status card. Applications for registration cards must be made directly to Revenu Québec. Initially, existing Fuel Tax Exemption Initiative (FTEI) cards will be used as registration cards until production delays can be eliminated.
The program will also require retail dealers of alcohol on a reserve to check the buyer’s status on each home-use purchase of alcohol by a qualifying individual. Retail dealers will continue to pay the applicable tax when they acquire alcohol from their suppliers. However, the computer system used under the program will support a retailer’s claim for reimbursement of the specific tax paid on products for exempt sales.
The province intends to extend the use of the TEFNT to the fuel tax system as a replacement for its existing FTEI program. However, system adjustments will be required to account for the specific nature of certain exemptions relating to fuel purchases by First Nations individuals and entities.
Tobacco Tax Increase
This year’s budget contained a reminder about the tobacco tax increase equal to $8 per carton of 200 cigarettes that took effect on February 8, 2023. The increase will raise the total tax on a carton of cigarettes to $37.80 from $29.80.
Tax Fairness Initiatives
The province reiterated its commitment to the Tax Fairness Action Plan, which aims to ensure tax fairness, combat tax evasion, and prevent tax avoidance. In this regard, the government indicated that it plans to undertake several initiatives, including:
- Increasing audit activities;
- Obtaining information on cryptocurrency assets (“cryptoassets”) and overseeing trading platforms and ATMs that facilitate transactions using such assets;
- Upgrading Revenue Québec’s service delivery;
- Increasing the fight against alcohol and tobacco smuggling and other economic crimes; and
- Following up on many previously announced measures to combat tax evasion and fraud against the government.
More Information
For information on new and extended government funding initiatives included in this year’s provincial budget, please navigate to:
https://www.mentorworks.ca/blog/government-funding/quebec-2023-budget/
Further details on Québec’s 2023–2024 budget may be found on the province’s website at:
http://www.finances.gouv.qc.ca/Budget_and_update/budget/index.asp.
To read key updates from Canada’s 2023 provincial budgets, please navigate to Key Changes | 2023 Canadian Federal and Provincial Budgets.
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to contact the Ryan TaxDirect® line at 1.800.667.1600 or taxdirect@ryan.com.