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Report on Business Quebec plans to match Ontario’s promised corporate tax cut, Legault says

Quebec intends to match the Ontario government’s promised corporate tax cut, Premier François Legault pledged in an interview with The Globe and Mail Monday.

“We’ll follow,” Mr. Legault said in Toronto, where the newly elected premier met with his Ontario counterpart, Doug Ford. “We have to be competitive."

One of Mr. Ford’s key promises in last spring’s election campaign was to reduce Ontario’s corporate tax rate to 10.5 per cent from 11.5 per cent – already the lowest in the country. Quebec’s rate stands at 11.7 per cent, although the province’s previous, Liberal government had planned to reduce it to 11.6 per cent next year and 11.5 per cent in 2020.

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“When I say that I want Quebec to be the best place to invest, it includes income tax rates,” Mr. Legault said, adding that he is “very anxious to see” what the federal government introduces in its fall economic update Wednesday.

Finance Minister Bill Morneau’s fall economic statement is expected to outline the government’s response to recent U.S. corporate tax cuts that have effectively erased Canada’s competitive advantage. The U.S. tax package also reduced personal income tax rates and included new tax incentives for businesses that invest in new equipment.

“The United States cut a lot, so we all know – Ontario, Ottawa and Quebec – that we’re in a position where we have to make a move to be competitive with the United States,” Mr. Legault said.

Mr. Morneau has signalled that while he is not likely to cut corporate or personal tax rates, Ottawa is open to new tax breaks for business investment. This could be done by expanding what is known as the accelerated capital cost allowance, an incentive that lets companies deduct capital expenses more quickly rather than gradually over the life of buildings, products or machinery.

Mr. Legault’s Coalition Avenir Québec (CAQ) government has made expanding the province’s exports a key element of its strategy to increase economic capacity – and that includes pursuing more trade opportunities with Ontario.

In his meeting with Mr. Ford, Mr. Legault made a sales pitch for Quebec hydroelectric power, arguing that it’s more cost-effective for Ontario to buy power from Quebec than to pour billions of dollars into the proposed refurbishment of Ontario’s aging nuclear plants. The province faces shortages within five years unless capacity is added.

“First, we have surpluses of hydroelectricity. Second, we’re ready to build new dams,” Mr. Legault told The Globe. “We think that we can do the same job for half of the price, building dams and transmission lines.”

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He offered to help Ontario workers who would suffer if the province were to import power from Quebec rather than revive older reactors by hiring them to work on new hydro projects in Quebec.

“We’re ready to hire a percentage of employees coming from Ontario,” he said.

He added that Quebec is also “open to discuss” using Ontario suppliers to help build the dams and transmission lines in Quebec that would supply Ontario’s power.

“[Mr. Ford] is a businessman, I’m a businessman,” said Mr. Legault, who founded and was CEO of Air Transat before entering politics two decades ago. “It’s good for both of us if we look at this alternative.”

But a spokesman for Mr. Ford poured cold water on the idea.

“Premier Doug Ford and the Ontario PCs campaigned on signing no additional energy contracts,” Simon Jefferies said in an e-mailed statement, adding that Ontario has its own surplus power, which it is selling “at a loss” to several Northern U.S. states. “We have no intention of moving forward on this proposal from Quebec for the time being, as it is not of any benefit to Ontario residents.”

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In his interview with The Globe, Mr. Legault also said his government is willing to lend support to troubled transportation equipment maker Bombardier Inc., one of Quebec’s biggest manufacturers. But he indicated that the province is not eager to rescue Bombardier’s aircraft operations, including the CRJ regional jet plant in Mirabel.

“It would be tough for Bombardier to continue competing with the CRJ. They would need a large partner,” he said. “They have to invest now to bring the aircraft up to date.” He did say his government would “try to protect the jobs there.”

“I see more future for Bombardier in transport,” he said, referring to the company’s rail and public transportation operations. He suggested he was more interested in working with Ontario and neighbouring U.S. states to attract Bombardier manufacturing investment “if there are conditions for new jobs, well-paid jobs – and it makes sense financially.

“I would like that the future development of Bombardier be more in North America than in Germany. … That’s what we’re discussing right now with Bombardier.”

With files from Bill Curry

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