Quebec Finance Minister Monique Jérôme-Forget tabled a cautious budget Thursday, one that provides a modest boost for business but not much in the way of changes for individuals.

Manufacturers will receive a much-needed break, as the province’s 2008-09 budget exempts the sector from the capital tax. Quebec has been struggling to attract investment and has been hit hard by the strong loonie. “To keep pace and seize opportunities, our businesses must invest,” said Jérôme-Forget, in her speech to the National Assembly. “This will enable them to develop products and services that differ from the competition’s and that will extend our know-how to new markets.”

Added to this is an investment tax credit for manufacturers ranging from 5% to 40%, depending on the remoteness of the region.

Other attempts to advance business development are a refundable tax credit for new information technology companies for new innovations, up to 30% of the firm’s employee’s wages, $50 million to support struggling municipalities and $2 million to fund a mining institute.

Observers are applauding the capital tax break, but say there still more needed to boost productivity in the province. “We are pleased the Quebec government has finally taken action to eliminate the punitive corporate capital tax,” said Tasha Kheiriddin, director for Quebec and la Francophonie the Fraser Institute, a Vancouver-based think-tank. “This is a good first step in addressing the province’s productivity and prosperity gap.”

“We have been asking for this measure for a long time,” said Jean-Luc Trahan, president and general manager of Québec Manufacturers and Exporters (QME). “It will allow manufacturers to increase their cash flow levels and
invest more to improve productivity.”

However, the budget doesn’t offer a lot to individuals in the province. “Quebec imposes one of the highest tax burdens of any Canadian province. In 2007, the average Quebec family earned $72, 214 and paid $34, 688 in taxes, amounting to 48% of their income. This budget does nothing to change that,” said Kheiriddin.

In this latest budget, the province is harmonizing the tax regulations so that Quebec residents can get in on the federal governments recently released tax-free savings account (TFSA), with a $5000 cap on contributions.

The budget also offers refundable tax credits for childcare services for those parents who don’t qualify for subsidized programs.

Seniors are looking at an increase in the home support credit, up 5% to 30%, which the government says represents $35 million for the elderly. In addition, the credit to shelter retirement income for seniors has been bumped up to $2000, from $1500.

But these measures just aren’t enough, according to Kheiriddin. “If the government really wants to help families, instead of tax credits for child care, the budget should give parents a personal income tax break,” she said.

The Quebec government is forecasting 1.5% economic growth in the province for 2008, down from 2.5% in the previous budget. It said it is hanging on to a $1.8 billion budgetary reserve in order to weather the current economic storm. “We will therefore be able to absorb the shock of the economic slowdown without raising taxes and without scaling back public services,” Jérôme-Forget told the National Assembly. “That is what I call governing responsibly.”

The minister said Quebec is not insulated from the economic slowdown that North America is experiencing, but that “the actions taken by our government should enable Québec to avoid a recession.”