Montreal, December 15, 2016 – While Quebecers are in full holiday shopping mode, a comparison of rates shows that sales taxes are higher here than in most of the provinces and American states that border us.
For example, last year, a financial institution estimated that each Quebecer would spend an average of around $1,060 in gifts and entertainment during the holiday period. The sales taxes included in such an amount represent $138, whereas they total just C$78 in Plattsburgh, New York, and C$57 in Burlington, Vermont.
Now that the province’s public finances are once again in balance, and that a modest surplus has been recorded, it is possible to reduce Quebecers’ tax burden, shows a Viewpoint published today by the MEI, which updates some recommendations from tax specialist Luc Godbout’s report.
Following his report published a year and a half ago, the government considered raising consumption taxes, and in return, reducing income taxes. This policy would have stimulated economic growth since personal and corporate income taxes penalize work and investment, the motors of economic activity.
But given the already high level of consumption taxes in Quebec, the main recommendations of the Godbout Report did not end up being followed. “The ideas contained in the report bumped up against the hard reality that we are already among the most heavily-taxed jurisdictions, and we cannot afford to raise taxes even further because of the tax competition from adjacent provinces and American states,” explains Youri Chassin, Research Director at the MEI and author of the publication.
Since many Quebecers shop across the border, as well as online from the websites of stores located outside the province, this competition prevents the government from raising sales taxes even higher than they are. On the other hand, reducing income taxes—in order to stimulate the economy—would be entirely possible given the room to manoeuvre that the government currently has.
“Quebecers’ tax burden would remain very high, but a little bit less so than before,” points out Youri Chassin. “We’re talking about giving taxpayers back $2.7 billion out of a total budget of $102.3 billion.”
By leaving a few dollars more in our pockets, the government would be giving us a much-appreciated little gift in time for next year’s Christmas shopping.
The Viewpoint entitled “Sales Taxes and Tax Competition” was prepared by Youri Chassin, Economist and Research Director at the MEI. 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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