Relief promised but it won’t materialize this year or next

The Couillard government i s pledging to reduce the tax burden for Quebecers, but it won’t be this year or next.

Most of the major tax- relief measures announced in Thursday ’s provincial budget will start to take effect in 2017 and be phased in over a period of years.

Meanwhile, Quebecers will be absorbing the tax hits introduced in previous budgets, including hikes in child- care fees and autoinsurance premiums and a 50 per cent reduction of the tax credit for professional and union dues.

The government pegged at $ 141 million the savings for individuals from four budget changes beginning in the 2016- 17 financial year. But the extra cost for individuals in 2015- 16 of previously announced measures is $ 493 million.

Finance Minister Carlos Leitão said job one for the government was balancing the budget, which is done. “I’m very much in favour of substantial reductions in personal income tax. To do that, we have to be able to fund it. How will we do that? That’s what we intend to discuss in coming months,” he said.

For now, the change with the greatest impact on individual taxpayers will be the reduction and gradual elimination of the “health contribution,” starting in 2017.

Paid when Quebecers complete their provincial income- tax returns, it can run from zero to $ 1,000, depending on income. With few exceptions, anyone 18 and older earning more than about $ 18,175 a year has been on the hook for it since 2011. Most Quebecers now pay about $ 200 annually.

It will be eliminated in 2017 for more than two million Quebecers who pay the lowest amount and by 2019 for the other two million, eventually saving taxpayers $ 744 million a year.

The government is also introducing what it calls a “tax shield” in 2016, a measure that will primarily benefit low- and middle- income families who, under the current system, risk losing much of two tax credits ( the work premium and tax credit for child- care expenses) if their work income spikes from one year to the next.

The amount of the credit will depend on household income and marital status, and be determined using a calculation provided on the provincial tax return. Taxpayers will have to apply for it.

Leitão said the measure will motivate Quebecers by allowing them to keep more of the proceeds from additional work.

The government estimates the tax shield will save more than 381,000 households an average of $ 130 a year, for a total annual saving of about $ 52 million.

In an effort to encourage more Quebecers to work beyond the province’s average retirement age of 62, the government is sweetening and lowering the age of eligibility of its tax credit for older workers. It will drop from 65 to 64 in 2016 and 63 in 2017.

The “work incentive for experienced workers” allows older employees to save provincial tax on income above $ 5,000 a year. Amounts eligible for the credit will rise progressively from the current $ 4,000 to a maximum of $ 10,000 in 2018.

“Quebec will be confronted with a major challenge in regard to manpower in the coming years and we want to create conditions that will encourage more experienced workers to pursue their career for longer and thus help not only to fill obvious needs but also ensure the transfer of knowledge and experience to the decision- makers of tomorrow,” Leitão said.

To help fund the measure, Quebec will raise to 70, from 65, the eligibility age for its tax credit with respect to age, starting in 2016. The change will be phased in over five years, one year at a time, meaning that nobody receiving it now will lose it.

The credit has been around since 1972, but times have changed and it’s no longer as crucial, the government said, as seniors now have access to programs like the prescription drug program, tax credit for home support and a tax credit for medical expenses.

Some seniors, however, will be receiving a tax break, starting next year. The budget announced a measure to assist those 65 and older living in their own homes who are hit by sudden hikes in municipal assessment of their properties. If the assessment is more than 7.5 per cent higher than the average for the municipality, they’ve lived in the home at least 15 years and net family income is $ 50,000 or less, they’ll be eligible for a rebate on municipal taxes.

They’ll have to request it on their provincial tax returns; the municipality will advise them how much ( if anything ) they ’re entitled to when it mails out the municipal tax statement.

Municipal tax statements will also be required for homeowners to qualify for Quebec’s Solidarity tax credit, starting next year. Tenants who receive the credit will have to submit forms from their landlords confirming their living arrangements.

Quebec currently requires no confirming documents for the Solidarity Credit, only completion of a questionnaire when citizens complete the provincial tax return, but the number of people eligible for the credit has far exceeded projections. The credit was introduced in 2011 to help residents pay housing costs.

“It became evident during the first years of the STC’s application that some of its terms rendered its administration difficult and complex for both individuals and Revenue Quebec,” the budget noted.

The credit also will be paid periodically rather than monthly, the government said.

It also decided to tinker slightly with the rules of tax- advantaged labour- sponsored funds, boosting the tax credit for the CSN’s Fondaction fund to 20 per cent from 15 per cent for one year, and eliminating the annual limit on contributions to Fondaction and the Quebec Federation of Labour’s Solidarity Fund. In turn, however, they’ll be required to invest at least 65 per cent of their portfolios in Quebec businesses, up from the current 60 per cent.

Conspicuously absent from the budget document was any mention of family income- splitting for households with children 18 and under.

In its final report last week, the Quebec Taxation Review Committee headed by Luc Godbout had urged the provincial government not to harmonize with the federal government’s initiative on that front last year, saying it ran counter to the province’s aim of giving people incentives to work.

Abolition of the health contribution and introduction of the tax shield were among the measures recommended last week in the committee report.

It has also proposed lowering the age of eligibility for the credit for experienced workers to age 60, raising the number of tax brackets to nine from four, raising the basic personal amount ( the income level under which no provincial tax is charged) to $ 18,000, and boosting the provincial sales tax to 11 per cent. None of those proposals were retained — at least not this time.