Taxes In Quebec: Why You Have To File 2 Returns & How It Could Finally End
Here's why we still have this extremely irritating system.
Quebec is the only province where residents get to experience the immense joy of filing two tax returns. What might seem like a small annual irritant is the product of decades of haggling over provincial and federal government powers.
The current situation represents a kind of stalemate. No one — not taxpayers, not the provincial government, not the federal parties — are particularly happy about it.
Here's how we got here and what current political leaders have to say about the possibility of finally simplifying things for Quebecers.
What's the root of the two tax return system?
Premier Maurice Duplessis is credited with staking out fiscal autonomy for Quebec.
There was a time when Quebec let the federal government have more control over taxation. In 1942, the province suspended its own collection of income and corporate taxes, a "temporary" measure then-Premier Adélard Godbout said would allow the federal government to increase its revenue during the Second World War.
Duplessis campaigned for greater provincial taxation powers after the war.
He told attendees at the 1950 Federal-Provincial Conference on the Constitution that "provincial autonomy cannot exist without definite and indispensable fiscal powers."
"It is useless," he said, "to have a declaration of rights if, at the same time, there is no financial and fiscal power to exercise those rights."
In a provincial government document, Duplessis is quoted as telling the 1955 meeting of the conference that by keeping taxation power for itself, the federal government was "[reducing] the provinces to legislative impotence."
"Effectively, a province with no other revenues than federal subsidies would become a kind of inferior organism."
In 1954, the Duplessis government forced the feds' hand, restoring its own income tax to fund programs under its jurisdiction. According to provincial records, the federal government eventually agreed to reduce its income tax to accommodate Quebec's.
What's Quebec's argument for control of taxes and revenue?
The provincial and federal governments seem to be treating this issue like a zero-sum game: the province would either have to cede tax control or gain additional tax-collecting powers.
The provincial government, of course, wants a single tax return to go through Revenu Québec instead of the CRA.
Quebec generally pushes for more fiscal control, arguing that costs for programs under provincial jurisdiction are growing fast than its revenue while the federal government benefits from the inverse situation: its revenue is growing faster than the cost of exercising its powers.
In a submission to a 2015 commission studying government efficiency, the Ministry of Finance also outlined the administrative benefits of maintaining Quebec's control of revenue. According to a report summarizing the commission's findings, the government argued that in-house revenue tracking allowed the ministry to "have continuous access" to fiscal information and quickly respond to financial needs and policy changes.
The double system is costly
That same commission found that Quebec could save as much as $392 million if it used the CRA.
Revenu Québec countered, the commission said in its report, by asserting that such a transfer of responsibilities would "deprive Quebec of revenues totalling $696 million in the fight against tax evasion," also currently under its jurisdiction.
The commission, however, suspected that since the federal government would likely just take over tax evasion investigations in the province, such a "loss of revenue" would be "improbable."
The report didn't acknowledge taxpayers' irritation with the double filing system but did say it was possible businesses incur additional — though limited and, in the public discourse, perhaps exaggerated — costs as a result of the setup.
The commission responsible concluded that Quebec should "seriously consider" consolidating taxation under the federal government.
Quebec is gunning for greater control of your taxes nonetheless
In May 2018, the National Assembly voted 102 to 0 in favour of a motion calling on the two levels of government to "implement a single tax report, transmitted to Revenu Québec, for all Quebec taxpayers, while preserving Quebec's fiscal autonomy."
Since the election of the CAQ government in October 2018, Premier François Legault has repeatedly demanded that the federal government give the province greater taxation power and, thus, create a single tax return.
He pushed party leaders, and Prime Minister Justin Trudeau in particular, on the issue ahead of the 2019 federal election, saying "there would be significant savings to be made by having a single tax return, savings for governments but also an ease for individuals and businesses."
The "implementation of a single tax return managed by the Quebec government" ended up one of the government's top four priorities for the new federal government.
The Liberal government is clutching its purse
In January 2019, then federal Minister of Families, Children and Social Development Jean-Yves Duclos, citing what he suggested was the need for a national standard of service, reportedly said the party would "not compromise" on the issue.
In response to a February 2019 motion by a Conservative MP asking the Liberal government to "work with" Quebec to create a single return, Minister of National Revenue Diane Lebouthillier asked the opposition to consider the "more than 5,500 Canada Revenue Agency employees" working in Quebec who would be out of the job if the province took over the federal government's tax responsibilities.
The Public Service Alliance of Canada, a union of public servants, echoed Lebouthillier's concern.
(The NDP, for its part, supported a single tax return for Quebecers so long as it didn't "result in a loss of employment for Quebec workers in regions such as Mauricie and Saguenay-Lac-Saint-Jean," Montreal MP Alexandre Boulerice said in 2019).
In 2022, with the Legault and Trudeau governments still deadlocked, Quebecers shouldn't expect a single tax return anytime soon.
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