Quebec tax burden remains highest in Canada, report finds

As a percentage of gross domestic product, Quebecers paid the most taxes in Canada in 2016, according to a report published on Thursday by Université de Sherbrooke’s Chaire de recherche en fiscalité et en finances publiques.

In 2016, governments collected a total of $152 billion in taxes from Quebec. Of that, 50 per cent was paid to the provincial government, 31 per cent went to the federal government, while local governments collected 10 per cent.

Another nine per cent went to the Quebec Pension Plan.

That’s the equivalent of 38.5 per cent of Quebec’s GDP.

In the rest of Canada, the average tax burden was 30.4 per cent of GDP. It was 26 per cent in the United States.

In Canada, Nova Scotia had the second highest tax burden, at 36.4 per cent of GDP, in Ontario it was 32.8 per cent. The lowest rate was in Saskatchewan, where government collected the equivalent of 27.9 per cent of the province’s GDP.

Quebec has had the highest tax burden in Canada since 1982.

If Quebec were a country, its tax burden would be higher than the 34.3 per cent average in the Organisation for Economic Cooperation, a group of 35, mostly wealthy, nations.

Still, Quebec’s tax burden is lower than in countries like Greece, the Netherlands, Austria and France. In the OECD, Denmark has the highest: 45.9 per cent of GDP.

“The rest of Canada, in terms of taxation, is closer to the United States than Quebec; Quebec is closer to Europe than the rest of Canada,” said Luc Godbout, the research chair in taxation and public finance at Université de Sherbrooke.

As a percentage of GDP, Quebec’s tax burden peaked in 2000, at 39.9 per cent. It fell to 36.3 per cent in 2008, the lowest level in recent years, but has been increasing ever since.

“It’s not bad news, per se, if we accept to be more taxed to have more public services,” Godbout said. While that might have an effect on economic growth, he said, “if all Quebecers are OK with having higher taxes, we can live with that.”

While many European countries are relying less on income tax, generating revenues through other forms of tax, that isn’t the case in Canada.

In 2016, 34.8 per cent of tax revenue raised by governments in Quebec was income tax, compared to the OECD average of 24.4 per cent. In the rest of Canada, it was 37.1 per cent.

Quebecers paid the equivalent of 13.4 per cent of GDP in income tax — behind only Iceland and Denmark. It was also third when it came to the property tax burden.

However, 27 OECD countries had a higher consumption tax burden than Quebec.

The report points out that the high tax burden in Quebec isn’t necessarily reflective of the disposable income of many Quebec families.

For example, when monetary benefits received through the tax system are included, a single parent who makes the median salary or less has a negative net tax burden — meaning they receive more money through the tax system than they pay. For those individuals, Quebec’s tax system leaves them with more money in their pocket than any other tax system in the OECD would.