How Quebec's Tax Policy Could Threaten Canada's Taxation System
Policy Brief by Kevin Hua
During the 2019 federal election, both the Conservative Party and the Bloc Québécois promised to implement a single tax administration under the provincial operation of Quebec [1]. Quebec is the only province to collect its provincial income tax independent of the consolidated collection and administration under the Canada Revenue Agency, thus requiring Quebecers to submit two separate tax returns to two separate tax agencies. The proposed policy would attempt to solve this divergence by delegating the collection and administration of federal income taxes within Quebec’s borders to the prerogative of Quebec City. However, such a policy is counterintuitive and detrimental to the efficacy and integrity of our system of taxation and is only politically promoted for selfish political opportunism.
The current duality of the Quebec tax system originated in 1947 under an agenda of provincial rights and fiscal autonomy by Union Nationale Premier Maurice Duplessis [2]. The crises and challenges of the Great Depression and World War II were responded by the Rowell-Sirois and Massey commissions recommending a centralization of political and financial power to the federal government [3]. Viewing this as an encroachment on provincial sovereignty, Duplessis opposed and countered with the Tremblay Commission as his argument against centralization and for autonomy, preserving the split tax administration [4]. Fiscal autonomy is regarded as a fundamental part of Quebec’s provincial sovereignty and nationalist identity to this day as demonstrated when the Quebec National Assembly unanimously endorsed a provincial single tax administration in 2018 [5]. It is upon this value that the Conservative Party wishes to exploit for electoral expediency and that the Bloc Quebecois desires to obtain more provincial power that they promote the policy [6].
In 2015, the Quebec government established the Commission de Révision Permanente des Programmes, or the ‘Robillard Commission’, with a mandate to review several provincial programs, agencies, and departments, including Revenu Québec and its split tax administration. In its findings, the commission determined that the current system’s duplication of bureaucracy imposed an increased cost on individuals and businesses creating waste with unnecessary expenditures [7]. Overall, the commission’s report challenged the current model’s efficiency, calculating that if Quebec were to adopt tax collection agreements with the federal government like other provinces, there would be an estimated $400 million in savings [8]. In its conclusion, it recommended that “the Quebec government should seriously consider the option of transferring its tax administration operations to the federal government” [9]. While the commission recognizes the deficiencies of the current framework, it finds itself that the Quebec government’s own commission addressing the policy issue recommends the entire opposite trajectory to a provincial single tax administration as a solution.
The Canada Revenue Agency employs around 5,500 employees in Quebec,[10] but a provincial single tax administration would place them at risk of redundancy and, thus, dismissal. Both the Union of Taxation Employees and the Public Service Alliance of Canada have declared their opposition to the policy due to the risk it places on the livelihoods and job security of their members [11]. A layoff of this magnitude would amount to $300 million in lost payroll wages and additional undefined economic losses in a ripple effect on local economies [12]. This will, also, undoubtedly threaten related and dependent Canada Revenue Agency jobs outside of Quebec with similar obsolescence and discharge. These negative economic implications are echoed by the Chamber of Commerce of Metropolitan Montreal supporting the Robillard Commission's conclusion [13]. Quebec Premier François Legault, a supporter of a provincial single tax administration, has admitted to this reality, stating that “it is certain” that there would be layoffs if the policy is pursued [14]. A provincial single tax administration would come with serious and severe consequences and repercussions directly and indirectly to livelihoods, vulnerable local economies, and communities.
In May of 2019, the University of Sherbrooke’s Chaire en fiscalité et en finances publiques convened a conference at its Longueuil campus on the topic of a provincial single tax administration [15]. The conference determined that it is an impractical policy under domestic and international tax laws and that if there was to be a single tax administration, the pragmatic choice is for it to be federal purview [16]. With more than 60 years of independent development, harmonization of the two taxation systems would be a monumental task where even "taxable income" is defined differently [17]. Quebec, a subnational entity, has no taxation jurisdiction or power outside of its own borders, making it susceptible to tax dodging and evasion as one would not need to move their assets out of Canada, but only merely out of Quebec to avoid taxation [18]. Quebec also holds no standing to the numerous international tax evasion agreements and no ability to negotiate on the international stage as these are federal constitutional responsibilities. They are not privy to the information shared by the agreements which would complicate and impede compliance to our obligations and may even require lengthy renegotiations of those numerous international compacts [19]. A national issue that involves us as a nation requires a nationally uniform and unified system, policy, and strategy rather than a provincially fractured, divided, and inconsistent one.
The current setup of our tax administration is not ideal, but it is an acceptable compromise to satisfy Quebec with some fiscal autonomy while maintaining the integrity of the overall system. The proposal of a single tax administration under the authority of Quebec is not in the best interest of either Canada or Quebec, instead, it adds only to further exacerbate inefficiencies and impasses within the Canadian tax collection and administration as well as uncertainty and precarity for the livelihoods of local economies and communities. The promotion of this misguided and erroneous policy by the Conservative Party and the Bloc Québécois cannot, therefore, be concluded to be motivated in good faith to the implementation of prudent public policy or the conduction of productive political progress. The scale of the policy issue should be proportional to the scale of the public policy in our governance.
“...to tax and to please, no more than to love and to be wise, is not given to men.” - Edmund Burke [20].
Daniel LeBlanc, “Trudeau attacks Conservative plan to let Quebec collect federal income taxes in province,” Globe and Mail, February 5, 2019, https://www.theglobeandmail.com/politics/article-trudeau-attacks-conservative-plan-to-let-quebec-collect-federal-income/.
Michel Sarra-Bournet, “DUPLESSIS, MAURICE LE NOBLET,” Dictionary of Canadian Biography, last modified 2019, http://www.biographi.ca/en/bio/duplessis_maurice_le_noblet_18E.html.
Sarra-Bournet, “DUPLESSIS.”
Sarra-Bournet, “DUPLESSIS.”
Giuseppe Valiante, “Quebec wants Ottawa to allow people in the province to file a single-tax return,” CBC, May 18, 2018, https://www.cbc.ca/news/canada/montreal/quebec-taxes-1.4664207.
Alan Freeman, “Scheer’s Quebec tax proposal shows nothing but desperation to win seats,” iPolitics, February 1, 2019, https://ipolitics.ca/2019/02/01/scheers-quebec-tax-proposal-shows-nothing-but-desperation-to-win-seats/.
Commission de Révision Permanente des Programmes, “Report of the Commission de Révision Permanente des Programmes: Focus on Performance,” (2015): 41.
Commission de Révision Permanente des Programmes, “Report of the Commission de Révision Permanente des Programmes: Focus on Performance,” 41.
Commission de Révision Permanente des Programmes, “Report of the Commission de Révision Permanente des Programmes: Focus on Performance,” 42.
Hélène Buzzetti, “Le NPD renonce à l’idée d’une déclaration de revenus unique,” Le Devoir, January 25, 2019, https://www.ledevoir.com/politique/canada/546272/des-deputes-federaux-mal-a-l-aise-avec-l-idee-du-rapport-d-impot-unique.
Marco Vigliotti, “CRA employees union campaigning against Scheer’s pledge of a single-tax return for Quebec,” iPolitics, August 12, 2019, https://ipolitics.ca/2019/08/12/cra-employees-union-campaigning-against-scheers-pledge-of-a-single-tax-return-for-quebec/.
“Quebec Single Tax Return: Don’t be Fooled by the Conservatives,” Union of Taxation Employees, August 12, 2019, https://www.ute-sei.org/en/campaigns/discover-truth.
“Second report by the Robillard Commission: an exacting exercise and a call to action,” The Chamber of Commerce of Metropolitan Montreal, August 31, 2015, https://www.ccmm.ca/en/commissionrobillard_2016/.
Hélène Buzzetti, “Une déclaration d'impôt unique ferait perdre des emplois,” Le Devoir, January 18, 2019, https://www.ledevoir.com/politique/canada/545711/declaration-de-revenus-unique-plusieurs-quebecois-perdront-leur-emploi-concede-legault.
Éric Desrosiers, “La déclaration de revenus unique ne serait pas la solution,” Le Devoir, May 7, 2019, https://www.ledevoir.com/economie/553768/fiscalite-la-declaration-de-revenus-unique-ne-serait-pas-la-solution-pensent-des-experts.
Desrosiers, “La déclaration de revenus unique ne serait pas la solution.”
Desrosiers, “La déclaration de revenus unique ne serait pas la solution.”
Freeman, “Scheer’s Quebec tax proposal shows nothing but desperation to win seats.”
Desrosiers, “La déclaration de revenus unique ne serait pas la solution.”
Edmund Burke, “On American Taxation” (Speech, House of Commons, London, April 19, 1774)