In our tax system, it is possible to reduce your taxable income using multiple measures, ranging from tax exemptions and refunds, to deductions, credits and other tax deferrals. From the government’s point of view, these measures are called tax expenditures, ie a voluntary renunciation by the public authorities of collecting the full amount due to them in taxes and duties in order to favor a type of behavior or a group of individuals.
For fiscal year 2011, the total amount of tax expenditures by the Quebec government amounted to nearly $21 billion. Of this amount, $16.1 billion was monopolized by measures affecting individuals, while $4.1 billion benefited corporations. This last amount breaks down into two groups: expenditures of $3.3 billion (remember that this category of expenditures has jumped by 24% over the past 6 years) intended to reduce the tax that must be paid by Quebec businesses and a little more than $800 million applied to reductions in consumption taxes.
By taking a critical look at these expenditures, it is interesting to remember that government discourse is often one-sided. When the time comes to implement a policy of budget cuts or spending limits, most often due to a budget deficit, making cuts in the services offered to the population is not the only option available. offer to the government. Tax expenditures, as their name suggests, are expenditures incurred by the State, but which do not necessarily have a counterpart in terms of services offered to the population. As such, and especially in the context of the fight against the deficit, it seems appropriate to visit some of the expenditures in order to verify whether the government, by tightening them, could achieve a minimum of savings.
Generosity towards companies
Of the $3.3 billion in tax expenditures intended to reduce the corporate tax rate, four measures, totaling $1.2 billion, do not seem worth keeping. Consider first the partial inclusion of capital gains in the calculation of tax payable. As for individuals, companies realizing a capital gain only have to pay tax on 50% of this gain, leaving the other 50% totally free of any form of taxation (unlike the income of salaried employees). -es who see 100% of their income subject to the tax system). This type of tax credit aims in theory to promote investment, but has the concrete effect of stimulating the financial economy to the detriment of the real economy, in addition to depriving the State of $415 million per year.
A second measure to be abolished would be the possibility for businesses to defer their losses (with the exception of agricultural and fishing businesses) in order to replenish public coffers by $568 million. In concrete terms, this type of tax expenditure allows a company to carry forward its losses from a previous year on its income tax return once its activities are profitable, thus sheltering profits from tax. Thus, some companies do not pay tax when they go through difficult times, a proposal with which we can completely agree, and also manage to escape the tax authorities once profitability is at the rendezvous.
Two other measures, the tax holidays offered to businesses ($88 million) and the tax credit relating to resources ($150 million), are also subject to criticism. The first because it allows, like the tax deferral measure, companies to waive their social responsibility without generating spinoffs in terms of economic activity or jobs; and the second because it is essentially designed to be to the advantage of companies working in the field of natural resource extraction, companies which, it should be remembered, enjoy one of the most advantageous royalty regimes.
As we can see, the tightening of spending is not something to think about in one direction. Before simply slashing spending that is directly useful to the population, it may be appropriate to review other types of spending which unduly prioritize businesses to the detriment of citizens.
