Government revenue and taxation

How are our public services funded?

Public services are funded through government revenue drawn primarily from three sources:

  • Taxation is the main source of funding (e.g. personal and corporate income tax, and consumption taxes).
  • Revenue from state-owned enterprises also funds the cost of services offered to citizens (e.g. dividends paid by Hydro-Québec, the Société des alcools du Québec and Loto-Québec).
  • Fees paid by users cover part of the cost of certain public services (e.g. subsidized childcare, car registration, driver’s licence).

Breakdown of the government’s consolidated revenue for 2015-2016
(billions of dollars)

In the tax revenue: Personal Income tax: 28 251 billions; Consumption Taxes: 18 610 billions; Corporate Taxes: 6 432 billions; Contributions for Health Services: 6 462 billions; School Property Tax: 2 044 billions. In the non-tax revenue: Miscellaneous revenue: 9 602 billions; Other Revenue Sources: 4 301 billions; Government Enterprises: 4 301 billions; Federal Transfers: 19 351 billions.
Source : Ministère des Finances, The Québec Economic Plan – November 2015 Update. November 26, 2015.

Taxation

Taxation as a source of funding for public services

Tax revenue will reach $61.8 billion in 2015-2016, that is, 76.8% of the Québec government’s own-source revenue.

Under the Québec tax system, tax revenue includes a range of amounts that are collected from individuals or businesses and that can be broken down into three groups:

  • amounts collected from individuals;
  • amounts collected from businesses;
  • consumption taxes.

Amounts collected from individuals

Amounts collected from individuals, a total of $29.2 billion in 2015-2016, are comprised primarily of personal income tax.

Breakdown of fiscal levies on individuals – 2015-2016
(millions of dollars)

Income Tax: 28 251 millions, or 96.6%; Individual Contributions to the HSF: 253 millions or 0.9%; Health Contribution: 730 millions or 2.5%.
Source : Ministère des Finances.

Amounts collected from businesses

Amounts collected from businesses, a total of $11 billion in 2015-2016, are comprised of corporate income tax, the employer contribution to the Health Services Fund (HSF) paid by corporations and partnerships, and various other amounts collected from corporations in the financial sector or corporations offering public services.

Breakdown of fiscal levies on corporations – 2015-2016
(millions of dollars)

Income Tax 5 077 millions or 46.1%; Health Services Fund: 4 626 or 42%; Other fiscal levies, which include tax on public sercices, capital tax paid by insurance compagnies and temporary contribution of financial institutions: 1 302 millions or 11.8%.
  1. Contributions paid by business corporations and general partnerships only.
Source : Ministère des Finances.

Consumption taxes

Québec levies two types of consumption taxes.

  • Ad valorem taxes are calculated according to a percentage of the selling price of the good or service to which they apply. The Québec sales tax (QST) and the tax on insurance premiums are examples of ad valorem taxes.
  • Specific taxes are calculated according to a fixed rate for each unit of a good or service sold. The taxes on alcoholic beverages, fuel and tobacco products are examples of specific taxes.

Breakdown of consumption tax levies – 2015-2016
(millions of dollars)

QST and tax on insurance premiums: 16 534 millions or 80.4%; Fuel: 2 316 or 11.3%; Tobacco products: 1 093 millions or 5.3%; Alcoholic beverages: 627 millions or 3%.
Source : Ministère des Finances.

The tax burden in Québec

Québec has a heavy tax burden compared to similar jurisdictions, in terms of both amounts collected from individuals and those collected from businesses.

Overall tax burden - 2012
(as percentage of GDP)

OECD: 33.7%; Québec: 36.6%; Canada (excluding Québec): 29.3%; United States: 24.4%.
Source: Ministère des Finances.

An onerous tax burden slows economic growth. That’s why the government pledged to reduce the tax burden on Quebecers and businesses.

Taxation as a socio-economic tool

Taxation is not just a tool for funding public services. The government uses the tax system to implement several public policies and assume its socio-economic responsibilities. These responsibilities include: