The tax system needs an overhaul

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Pontiac Perspective  Peter J. Gauthier


Pontiac Perspective  Peter J. Gauthier

It’s tax time. This is your opportunity to support your government financially. All you have to do is file your income tax return (and pay any outstanding amount). And, if you live in Quebec you get to file your return twice – once for the federal government and once more for the provincial government. But do you get a fair return for your taxes?
Quebecers pay the highest income tax in North America. If Quebec’s tax rates were the same as Ontario’s, Quebecers would pay five billion dollars less in income tax –  despite the fact that 40% of “tax payers” in Quebec do not pay any income tax because they are too poor to do so. The equivalent number for Ontario is 29%.
Where do all the tax dollars go? First, a substantial portion goes to paying interest on government borrowing. In terms of net direct debt, Quebec’s per capita rate is the highest in Canada – $21,708.  Quebec’s gross debt is more than 54% the size of its total economic output. This is “by far the highest share of any of the provinces,” notes an analysis by economists at the Conference Board of Canada.
The second factor is the cost of Quebec’s civil service. In all other provinces, the civil service is between five and six percent of the work force. In Quebec, the provincial civil service represents twelve percent of the work force. Add to these the endemic corruption and protectionist inefficiencies that afflict the government’s infrastructure investments and leave Quebecers with structures of questionable quality.
Who pays for this economic quagmire? Quebec’s tax rate on the rich (those earning over $200,000.00 per year) is the highest not only in North America, but also in the G7 countries.  However, Quebec also has the most byzantine tax regime. This allows the rich to work around the tax system.
Those who really bear the burden of tax in Quebec are salaried employees earning between $25,000.00 and $70,000.00. These tax-payers cannot take advantage of Quebec’s many tax saving options. Tax payers with revenues between $50,000 and $100,000 earn 28% of total income and contribute 37.5% of total provincial income tax.
And yet the Quebec government and many Quebecers believe that they have an advanced, egalitarian system of taxation. Instead of a progressive system, income taxes in Quebec are regressive. The majority of tax-payers have little incentive to save and invest; a necessary component of a growing economy.
Quebec needs a major overhaul of its wasteful practices. It needs a more disciplined, fairer system of government administration, of which income tax policies are a significant component.