Highlights
- According to KPMG's report Focus on Tax 2016, tax costs in the Québec City census metropolitan area (CMA) are 46.4% lower than in the US, which serves as the benchmark
- Québec City is among the world's Top 10 comparably sized metropolitan regions, i.e. with populations of over 500,000 inhabitants in mature markets.
- Among the 111 regions studied (all categories combined), Québec City ranked 16th worldwide. It was in next-to-last place in Canada, ahead of Montreal.
- Québec City's tax costs are lower than the average for US cities in the sectors associated with digital services (75.5% lower), R&D (59% lower), manufacturing (38.2% lower) and business services (28.9% lower).
Corporate Income Tax
Selection of 8 regions with more than 500,000 inhabitants
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Total effective tax rate, by business
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Total tax costs
Selection of world regions with more than 500,000 inhabitants
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Total Effective Tax Rate,
Selecting regions with more than 500,000 inhabitants
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Commentary
According to KPMG's report Focus on Tax 2016, tax costs in the Québec City CMA are 46.4% lower than in the US (Canada as a whole is 47.6% lower), with the US serving as the benchmark. The region is thus slightly above the Canadian average. The sustained economic growth observed over the past 24 years, a source of envy for many observers, combined with the maturity of the regional economy, might well account for this situation. However, the Québec City region also has a competitive tax environment in international terms. In 2016, it was ranked seventh among the world's Top 10 metropolitan regions with populations of over 500,000 inhabitants in mature markets.
KPMG's tax study is a Competitive Alternatives special report. Published in March 2016, Competitive Alternatives compared business operating costs and attractiveness factors. The initial report indicated that it was 16.1% cheaper to operate a business in Québec City, compared with the average for US cities; this was good for the #1 position worldwide. What's more, the report showed that taxes accounted for 11% of business operating costs in the region (10.6% in Canada as a whole).
The additional results published in July 2016 indicate that the Québec City CMA had a total effective tax rate (TETR) of 38.6% in 2016 (39.4% in Canada as a whole). The TETR is the sum total of corporate income tax (9%), other business taxes (property taxes, capital tax, sales taxes, etc.) (7.4%) and labour costs (contributions, remuneration, etc.) (22.2%). The region is noted for its low corporate income tax rate and its competitive labour costs. As regards other corporate tax rates, which remain low, Québec City faces slightly more competition worldwide. Over the past few years, Québec City's robust economy has led to massive investments aimed at renewing the non-residential building stock; these investments were all subject to property tax and capital gains tax, for example.
The 2016 results also show that Québec City offers corporate income tax credits totalling 5.4% for R&D services and 4.9% for digital services. It is worth noting that companies in the digital sector also benefit from low tax rates on other revenues and from various incentives aimed at boosting production. The corporate income tax rate in the manufacturing sector was 14.1%, although the tax on other revenues was only 10% (this aspect is crucial when it comes to attracting manufacturing companies). Business service activities paint a more faithful picture of the tax regime since there are fewer special tax incentives in that sector. The income tax rate in this regard was 26.2%, regarded as one of the very lowest rates, particularly in North America and Europe.
According to this corporate tax data, the Québec City CMA is positioned as an attractive region at the international level thanks to its low tax rates and tax incentives. Continued regional growth and economic maturity are additional factors that are sure to attract businesses, support investment and promote Québec City's dynamic record of performance.
Louis Gagnon
Senior Economist
Québec International
