The Quebec government unveiled its 2009-2010 budget on Thursday, announcing a new stock savings plan, an emergency business fund and a slew of other measures designed to ensure businesses have access to cash.

The budget includes measures to inject nearly $3.4 billion into the economy in 2009 and 2010, according to Finance Minister Monique Jérôme-Forget.

“This budget mobilizes. It invites society’s players, unions, businesses, community groups and government corporations to come together as a team to counter the economic recession,” Jérôme-Forget said.

A new stock savings plan will boost the capitalization of medium-sized exchange-listed companies in Quebec by encouraging residents to invest. It will offer investors in eligible companies tax deductions of 150% until Dec. 31, 2010, and 100% thereafter, as long as they hold the securities for at least two years.

“The creation of this new stock savings plan is a way of encouraging Quebecers to become directly involved in the economic recovery and the vitality of our businesses,” said Jérôme-Forget.

The plan replaces a similar plan — the SME Growth Stock Plan — established in 2005-06, which offered investors tax deductions of 100% of the share acquisition costs for small and medium-sized businesses. The new plan takes into consideration the fact that companies of all sizes are being impacted by the economic turmoil, the government said in the budget.

Under the new plan, which will be accessible to roughly 225 public companies with total market capitalization of $4 billion, investors will have access to a more diverse pool of eligible securities.

Another measure to boost the availability of cash for businesses is the creation of a two-year $500 million emergency fund in partnership with the Fonds de solidarité FTQ and the Société générale de financement. The fund will invest in businesses in all sectors, supporting medium and large enterprises that are affected by the economic situation and have pressing needs for cash resources.

Other measures to ensure that businesses have access to funds include a $1 billion contribution to the SGF, which invests in development capital; $1.2 billion in new resources for the Renfort program, which was established to meet the short-term cash requirements of businesses; and the creation of a new $825 million fund to finance venture capital funds.

The Quebec government also announced that it will increase the Quebec sales tax from 7.5% to 8.5% on Jan. 1, 2011. Correspondingly, the government will increase the refundable sales tax credit by $150 for a couple, $125 for a person living alone and by $75 in other cases, in order to mitigate the impact of the increase on low and middle-income households.

“The increase in the sales tax rate will have no impact on the financial situation of low-income households,” the minister said. She explained that increasing sales tax is preferable to increasing income tax since it does not hurt the competitiveness of our exports, it does not discourage work effort, and it is not a disincentive to save.

The sales tax increase is expected to boost the province’s revenue by $1.2 billion a year, but will not hurt economic activity, the government said.

The increase in sales tax is part of the government’s plan to return to balanced budgets within five years. While the government successfully balanced the budget for 2008-09, it expects to incur a deficit of $3.9 billion in 2009-2010.

The plan to balance the budget includes tighter spending controls that limit spending growth to 3.2% by 2010-2011, as well as greater efforts to fight tax evasion and avoidance. The government will also introduce a new public services funding policy that stipulates annual indexing of fees to the rate of inflation as of Jan. 1, 2011.

“This plan will be implemented once the recovery is well under way,” Jérôme-Forget said. “First, we will exercise tight control over public spending. Second, we will implement measures to increase revenues.”

IE