On April 23, 2024, Quebec's Finance Minister, Eric Girard, defended the decision of François Legault's government to adjust the provincial tax regime to align with the new federal measures, including the increase in the capital gains inclusion rate.

This measure, aimed at harmonizing Quebec's tax system with the federal one, could significantly contribute to reducing the province's historic deficit of 1 billion dollars. According to the minister's projections, increasing the taxation on capital gains is expected to generate about 3 billion dollars over five years.

A Rapid Decision and Its Effects

In response to urgency expressed by the public and the opposition, the Quebec government made this decision within 72 hours following the federal budget release by Chrystia Freeland. Eric Girard specified that this measure would not negatively impact marginal investments while simplifying the tax regime to avoid complications.

The minister also explained that the additional revenue generated in the early years would help mitigate the projected budget deficit, estimating that the deficit could be reduced to about 10 billion dollars, from the initially projected 11 billion.

Long-Term Implications

In the long term, this change is expected to bring in between 600 to 700 million dollars annually to the Quebec state after the first four years. This new capital gains tax will primarily apply to assets that have increased in value, such as second homes, cottages, multiplexes, and stocks.

The minister emphasized that this decision represented an "interesting compromise" in the context of many assumptions about the means by which the Trudeau government would seek to increase its revenues. The measure, expected to affect about 10,000 people in Quebec, will only raise the capital gains inclusion rate to 66.7% for amounts exceeding 250,000 dollars, thus avoiding concerns over a higher rate of 75%.