QUEBEC — With Quebec’s auditor-general saying the government’s financial forecasts are plausible, Eric Girard, the minister of finance, quickly announced Quebecers can expect an income-tax cut if the Coalition Avenir Québec is re-elected Oct. 3.
“You know, in 2018, we promised to reduce the fiscal burden of Quebecers,” Girard told reporters. “We did, to the magnitude of $3 billion per year, but we did not touch personal income tax.
“What we would like to do, in a second mandate, would be to reduce the gap between the personal income tax burden of Quebecers versus the rest of North America or Canadians.”
Girard was not more specific about what kind of tax cut citizens could expect. He said the details would be outlined sometime during the election campaign.
All he would say is that the cut will be “orderly and responsible,” and not imperil Quebec’s plan to return to balanced books by 2027-2028 without cutting services to citizens.
In making the announcement, the CAQ joins the Quebec Liberals and Conservative Party of Quebec in promising an income tax break — and Quebec is still in the leadup to the general election. It is expected to be called at the end of August.
On Friday, Premier François Legault hinted at a cut, saying he found the idea “interesting.”
Girard made the pledge within an hour of Quebec’s auditor general, Guylaine Leclerc, releasing an independent pre-election assessment of the government’s finances. The report is required under Quebec’s electoral law and is designed to level the playing field for all the parties on the state of Quebec’s finances before they make too many expensive promises.
In her report, Leclerc concludes the government’s forecasts are “plausible,” but warns there is a “very high” level of uncertainty in its long-term forecasts, owing to soaring inflation, the COVID-19 pandemic and Ukraine war-related economic disruptions.
But it is clear that after forecasting a $7.4-billion deficit for 2021-2022 in the March 22 budget, the government today is awash in cash on the cusp of the election and the auditor recognizes this.
She said Quebec’s independent revenues will continue to climb — on average by 3.2 per cent a year — as normal economic activity resumes in the post-pandemic period, which means more income tax revenue for Quebec’s treasury. The new estimate is that Quebec’s total independent revenues are going to be $4.7-billion higher than anticipated in the March budget.
At the same time, Quebec will be spending less on some promised service programs, mainly because it cannot find the workers it needs to provide them, owing to labour shortages, Leclerc says.
The result of these two factors is that Leclerc foresees an accounting surplus of $1.772 billion in the 2022-2023 fiscal year instead of a deficit, and a $2.6-billion surplus the year after.
Those numbers are before the regular annual contribution to Quebec’s debt-fighting Generations Fund. But even after those payments, the deficit totals only $729 million in 2022-2023.
The report thus represents good news for the government, but there are warnings, too.
“The assumptions made and forecasts related to the financial framework and debt are plausible for the years 2022-2023 to 2024-2025,” Leclerc said.
“However, uncertainty surrounding these forecasts is very high, especially due to soaring inflation, which has caused monetary policies to tighten both in Canada and abroad, the war in Ukraine and the continuing effects of the pandemic across the globe,” she said.
To err on the side of caution, the auditor suggests Quebec include alternative financial forecasts, including a buffer of $2.4 billion in the 2023-2024 budget and $2.25 billion in the 2024-2025 forecast.
She noted the federal government recently did exactly that: presenting a less optimistic scenario and another, more positive scenario.
Girard, while cautious, said he believes Quebec will dodge most of the effects of the recession. He noted he has already revised his own budgetary growth forecast for 2022 from 2.7 per cent in the last budget to 3.4 per cent.
While the forecast on the inflation rate for 2022 was initially 6.5 per cent, the real rate in 2023 is expected to be 3.2 per cent.
“Our forecast is balanced,” Girard argued. “It is possible that the economy grows stronger. It is possible that the growth is weaker.”
Asked if he is leaving the house in order after four years in office, Girard said Quebec’s economy has displayed extraordinary strength, even bouncing back in 2020 from the worst recession since the Second World War.
“I do meet a lot of investors and rating agencies,” Girard said. “I can tell you that the resilience of our economy and the soundness of our public finances is appreciated.”
Moments later, Liberal finance critic Carlos Leitâo, who is not seeking re-election, said he agreed with Girard’s view that it makes sense to cut taxes even before Quebec rebalances the books because Quebec families are suffering the effects of inflation now.
“We came to the conclusion that a tax cut was the appropriate response,” Leitâo told reporters. “Since we’ve done that, other parties, even the CAQ today, and the Conservatives yesterday, are going in the same direction.
“It (inflation) is really hitting people hard. People go to the grocery store and say, do I buy this or pay my rent at the end of the month? So I think the cut is appropriate.”
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