On February 20, 2014, Minister of Finance and the Economy Nicolas Marceau tabled Quebec's 2014 budget. The "Return to a Balanced Budget in 2015-2016" fiscal plan anticipates a deficit of $1.75 billion in 2014-2015. The government believes that job creation and the prosperity that follows will allow the province to meet its goal of fiscal balance in the next provincial budget.
Commodity Tax Measures
This year's budget included some changes to the Quebec Sales Tax ("QST") system that are consistent with those proposed in the federal budget announced on February 11, 2014. No changes to the specific tax on tobacco or alcohol were announced. In accordance with its promise to be bound by all changes to the tax base of the GST/HST that are implemented by the federal government, the Minister confirmed Quebec's implementation of the following measures introduced in the federal budget:
- Enhanced registration compliance - The Minister will be given the discretionary authority to register and assign a QST registration number to a person that fails to comply with the requirement to register.
- Expanded health care provisions - Acupuncture and naturopathic services will be added to the list of exempt non-medical supplies when supplied by acupuncture and naturopathic practitioners, respectively.
- Election for nil consideration - Availability of the nil consideration election will be extended to new members of a closely related group where the new member does not have other property before making the election. In addition, the expectation is that the election for QST purposes will need to be filed with Revenue Quebec, as opposed to maintained in a registrant's records as is currently sufficient.
For further background and details on the proposed changes, please see our tax development on the federal budget, which is available at:
While the Minister has promised to adopt the changes noted above, this will only occur once Royal Assent is given to the federal legislation. The effective dates, however, will be consistent with the dates that are determined for the federal measures.
The Fight Against Tax Evasion and Unreported Work
As first announced in October 2009, Quebec will continue to seek significant tax recoveries by "stepping up" its fight against tax evasion, unreported work and crime. As a result of this effort, Quebec has generated tax recoveries of almost $3.5 billion in fiscal 2012-2013 from increased tax audits and recovery measures. In this budget, the province has pledged to intensify the fight against tax evasion and unreported work in every sector of its economy. In particular, this intensified focus will be aimed at the construction industry, employment agencies, and the restaurant sector.
To help fight tax evasion in the construction and employment agency sectors, Quebec will be introducing an attestation initiative to begin in the fall of 2014. Under this initiative, construction companies entering into private construction contracts of $25,000 or more and employment agencies entering into contracts of $2,500 or more will have to obtain an attestation from Revenue Quebec. This attestation will consist of an acknowledgement from the province that the business in question has filed all required returns under the various Quebec tax laws (i.e., income tax, QST, source deductions and social contributions). Construction companies that enter into public contracts are already required to obtain these attestations from Revenue Quebec. Additionally, clients of employment agencies will be required, as of 2015, to report on a regular basis the amount of payments made to these agencies.
From a commodity tax perspective, the primary focus is on what the province terms "false-billing fraud" (i.e., fraudulently claimed input tax refunds using fake invoices). To curtail this practice, the province will undertake more audits of construction companies, improve its audit selection criteria related to risky files, and scrutinize certain businesses to determine if they are actually carrying on business in Quebec.
As of November 2011, all restaurant establishments have been required to issue bills to their clients that are produced by a sales recording module ("SRM"). The SRM was introduced to improve tax compliance in the industry by ensuring that every customer receives a bill, and to improve the efficiency of inspection and audit activities. Based on the success of this measure in restaurants, this year's budget has announced that the use of SRMs will be expanded to bars and resto-bars. It is estimated that roughly 6,100 new establishments will be required to begin using SRMs over a 5-month period commencing in the fall of 2014. As with the introduction of SRMs in restaurants, a subsidy program will be established to help these taxpayers acquire the required technology.
Additional information on the 2014-2015 Quebec budget is available on the province's web site at: http://www.budget.finances.gouv.qc.ca/budget/2014-2015/en/index.asp