MONTRÉAL, Feb. 24, 2025 /CNW/ - The HEC Montréal Centre for Productivity and Prosperity – Walter J. Somers Foundation (CPP) published its conclusions today under its mandate from the Ministère des Finances du Québec to analyze the effectiveness of fiscal policy relating to income tax credits for tax-advantaged funds. Based on tax data from thousands of Quebec firms, the CPP researchers came to a clear conclusion: maintaining this policy cannot be justified, given the size of the tax expenditure it involves.
"The government is stubbornly applying tax strategies based on the needs of another era," explains Robert Gagné, CPP Director and co-author of the study. "On average, the Quebec government gave up revenue of approximately $156 million a year to finance the credit for contributions to labour-sponsored funds between 2012 and 2019, meaning an average cost of $45,594 for each job created. Given that job creation hasn't been an economic development concern for at least 10 years, this is obviously a disproportionate expenditure."
The study also examines the claims of profitability by the tax-advantaged funds concerned, and reveals that their impact on tax revenue does not offset the related tax expenditure. "It takes an average of 15 years for the government to recover the tax expenditure committed to finance a round of investment. And even then, a large part of the amount recovered in taxes would be financed by increased contributions to the Health Services Fund associated with the jobs created, which assumes that these jobs could not have been created without the help of the funds," notes Jonathan Deslauriers, CPP Executive Director and co-author of the study. "Although we know that the policy is not intended to increase tax revenue, maintaining these associated credits for purposes of economic development seems hard to justify."
Lastly, in view of the US government's threats to impose tariffs, the HEC Montréal researchers warn the Quebec government not to fall into the trap of trying to save jobs. Productivity is the issue that Quebec must address to guarantee its economic prosperity.
"The tariffs must not be used as an excuse to focus even more on job creation, if the objective is to improve Quebec's lagging productivity. Over 80% of the fiscal support that goes to businesses is still intended to stimulate employment, directly or indirectly, rather than competitiveness. The fiscal policy concerning income tax credits for tax-advantaged funds unfortunately is one in a long list of outdated and costly tax policies that the government must rethink," states Gagné.
For more details, consult "Évaluation de la politique fiscale relative aux crédits d'impôt pour les fonds fiscalisés" (in French only).
About the Centre for Productivity and Prosperity – Walter J. Somers Foundation
The Centre for Productivity and Prosperity – Walter J. Somers Foundation has a twofold mission. First of all, it is devoted to research on productivity and prosperity, mainly in Quebec. The Centre then shares its research findings through knowledge transfer and educational activities.
www.cpp.hec.ca/ – [email protected] – Follow us on LinkedIn and X
About the Walter J. Somers Foundation
The Somers family established the Walter J. Somers Foundation in tribute to the founder of the Walter Group. Through different donations, the Foundation pursues the family heritage of commitment to the community and contributes to the prosperity of Quebec society, firstly by helping to improve its productivity but also by supporting excellence in youth education.
SOURCE HEC Montréal - Centre sur la productivité et la prospérité
Information: Valérie Dubuc, Media Relations Manager, 514 895-6087 / [email protected]
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