TechnoMontréal presents the impact of ICT sector tax measures
TechnoMontréal presents a report that outlines the impact of ICT sector tax measures for the Quebec government
The input-output model shows that the CDAE and R&D credits generate tax revenues of $751 million for the government and represent leverage for the creation and maintenance of 22,000 jobs.
TechnoMontréal has presented a report to the Quebec government’s Commission d'examen sur la fiscalité québécoise. The report includes five recommendations that revolve around two tax measures for businesses: the refundable tax credit for the development of e-business (CDAE) and the refundable tax credit for scientific research and experimental development (R&D).
To measure the economic and fiscal benefits of the two measures, TechnoMontréal used the Quebec input-output model (MISQ) – a first in the province for the ICT industry. This model, used in particular by Quebec’s Institut de la statistique, is a tool that simulates the effects of certain changes in the Quebec economy. As part of this analysis, TechnoMontréal also held three consultations with various businesses, teaching and research institutions, and associations.
The quantitative study results corroborate what was learned from these consultations: the CDAE and R&D measures had an impact on around 10,600 direct jobs and close to 22,000 jobs in total, if indirect jobs are also included. In addition, theses two tax credits bring in approximately $751 million in tax revenues for the government; a net surplus of around $300 million. Considering that these incentives cost the government approximately $451 million, the analysis shows a net return totalling close to 67% for the public coffers.
“The results of the cuts simulation point to major consequences for both the ICT industry and the government. According to our analyses, the 20% cuts announced in June 2014 will create a loss of 4,400 jobs, as well as a reduction in tax revenues of $150.5 million for the province, creating a net loss of $60.2 million in public finances. As well, the large majority of the negative impact, in terms of jobs, will be concentrated in the metropolitan region of Montreal, who will suffer 59% of the losses for the CDAE cuts and close to 86% for the R&D cuts,” stated Stéphane Couture, President of TechnoMontréal’s Board of Directors.
“The ICT sector is an economic engine for Quebec, with a GDP growth in the last ten years that is twice that of the economy as a whole. The raw material of our industry is a qualified workforce and its knowledge. The CDAE and R&D credits are two main tools that allow our businesses to invest in creating and consolidating high value-added jobs. The reductions to these credits send a negative message to both local and international companies, many of whom now consider the Quebec investment climate to be lacking predictability and stability,” stresses Lidia Divry, Executive Director of TechnoMontréal.
Five recommendations to innovate and build a Quebec that is both digital and prosperous
The report, presented by invitation of the Commission d'examen sur la fiscalité québécoise proposes five recommendations that allow for the creation and maintenance of thousands of quality jobs, while creating hundreds of millions in direct and indirect economic benefits and tax revenues:
1. Revoke the 20% reduction of the two credits (CDAE and R&D) applied in June 2014 for the ICT sector.
2. Abolish the two inclusion criteria (75% and 50%) and make it such that the CDAE be applied to companies (suppliers of ICT services) with admissible activities in e-business, regardless of their activity rates in e-business.
3. Add expenses related to the commercialization of admissible activities to the CDAE refund.
4. Harmonize the interventions and decisions of Investissement Québec and Revenu Québec.
5. Ensure the predictability and stability of tax measures (CDAE and R&D) to allow businesses to manage investment strategies and job creation.
Consult the English summary of the report
The complete report can be consulted here (french only)