Quebec could lead North America in business tax competitiveness if it eliminated corporate subsidies, says the MEI
Montreal, June 19, 2025 – Quebec could become the most attractive business tax jurisdiction in North America if it eliminated corporate subsidies and used the savings to reduce corporate taxes, states a new MEI study published this morning.
“The Quebec government chases away businesses with a high corporate tax rate but then tries to entice them with subsidies,” says Emmanuelle B. Faubert, economist at the MEI and author of the report. “It’s a counterproductive strategy that props up the few and the punishes the rest.”
The Quebec government currently taxes businesses at a rate of 11.5 per cent. Combined with the federal rate of 15 per cent, this brings the total corporate tax rate to 26.5 per cent, one of the highest in North America.
Quebec also subsidizes industry at the highest rate of any province in Canada. Between 2018 and 2023, subsidies accounted for the equivalent of 59.8 per cent of corporate tax revenues.
In the most recent fiscal year, the government collected $11.4 billion in corporate tax revenue while paying out $7.8 billion in subsidies to businesses. That’s over 70 per cent of these tax revenues redistributed as subsidies.
High-profile examples include a $710-million grant to Swedish battery maker Northvolt to build a facility in Quebec in September 2023. The company declared bankruptcy in March 2025 and is winding down its operations in Sweden, though it claims Quebec operations are unaffected.
Another major beneficiary is Lion Electric, which has received more than $200 million in public funding. It filed for creditor protection in December 2024. Last month, Economy Minister Christine Fréchette announced that the government would not reinvest more money into the company.
“These policies don’t attract strong, sustainable investment,” says Ms. Faubert. “They attract firms that rely on government money for survival.”
In 2024 alone, Quebec is estimated to have lost over $515 million subsidizing companies that are now insolvent.
The MEI researcher underscores that Quebec could turn this strategy around. The report shows that eliminating corporate subsidies would free up sufficient funds to allow the government to reduce the provincial corporate tax rate by 6.75 percentage points, from 11.5 per cent to 4.75 per cent, without impacting revenues.
Combined with the federal rate, this would give Quebec a total corporate tax rate of 19.75 per cent, lower than the minimum U.S. federal rate of 21 per cent.
“Eliminating corporate subsidies would give the Quebec government room to permanently lower taxes,” concludes Ms. Faubert. “Such a tax overhaul would allow Quebec to go from being the champion of subsidies to one of the most attractive jurisdictions for doing business.”
The MEI viewpoint is available here.
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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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