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$28.3 billion: Quebec workers ultimately pay most payroll taxes

Montreal, Thursday, November 13, 2014 – The Quebec Taxation Review Committee presided over by Luc Godbout must provide recommendations to the government in December. One significant component of taxation in Quebec—payroll taxes—remains poorly understood by workers, even though the amounts collected are substantial.

On every paycheck, employees notice a discrepancy between what they receive and what their employers pay out. However, many of them fail to realize the magnitude of the sums that their employers must pay to the taxman in addition to the salaries they are paid. In a Viewpoint published today, the MEI sketches a picture of payroll taxes in order to help Quebec workers better grasp the impact these have on their remuneration.

In Quebec, there are seven taxes and social security contributions that vary as a function of payroll. Aside from premiums for employment insurance, a federal program, the six others are collected at the provincial level.

Of all the Canadian provinces, it is in Quebec that total payroll taxes are the highest. They are around 21% higher in Quebec than in Ontario. “Over the past year, for every $100 in salaries, Quebec employees and employers had to pay $22.15 in payroll taxes and contributions to the different levels of government. We’re talking about a total of over $28.3 billion, the equivalent of more than $7,000 per worker,” explains Yanick Labrie, author of the study and an economist with the MEI.

Even though it is employers who pay the greater part of these amounts to government, this does not necessarily mean that they are the ones who ultimately bear the burden of these taxes. Indeed, employers can pass them along to their customers by raising prices, to their shareholders by reducing dividends, or to their employees by restricting salary increases. This last option is the most plausible because of the more limited mobility of workers compared to goods and services or to capital.

“Empirical studies carried out in Canada confirm this: Between 87% and 100% of payroll taxes are ultimately paid by employees. This is all the more troubling when one considers the wage gap that already exists between Quebec workers and those of other provinces. It would be a good thing if, among the Quebec Taxation Review Committee’s recommendations, employees could benefit from a reduction in these taxes,” concludes Yanick Labrie.

The Viewpoint entitled “What Effect Do Payroll Taxes Have on Workers?” was prepared by Yanick Labrie, economist with the Montreal Economic Institute. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Mariam Diaby, Communications Director, Montreal Economic Institute / Tel.: 514-273-0969 ext. 2231 / Cell.: 514-668-3063 / Email: mdiaby@iedm.org

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