Quebec's Finance Minister said he is willing to accept a smaller tax-rate increase for higher-income earners, but is adamant that a tax hike of some size will be implemented.
Nicolas Marceau insisted Tuesday that in negotiations with the opposition he will not cave in to pressure against the Parti Québecois plan for a retroactive increase, meant to replace the revenue lost because of the impending elimination of the health tax.
During the recent election campaign, the PQ said it would introduce two new rates for the wealthier segment of Quebec taxpayers. The provincial rate would be set at 28 per cent for those with a taxable income of $130,000 to $250,000 and would climb to 31 per cent for those earning more than $250,000.
"We remain firm on abolishing the health tax and on having the more affluent pay more taxes to compensate for the shortfall in revenues," Mr. Marceau said in an interview. "On that we remain quite firm. As for the tax rates, yes this can certainly be discussed."
The Finance Minister has drawn the line in the sand as the PQ minority government prepares to negotiate with the opposition parties to get approval for the new tax measures.
The opposition parties said they were ready to negotiate and avoid defeating the government this fall so soon after an election campaign.
"We are still in September," said interim Liberal leader Jean-Marc Fournier. "The election was held in September. Frankly I don't think I'd be doing my job if I gave it [defeating the government] any consideration."
The Liberals, which accused the PQ of hiding the truth from Quebeckers and of improvising a policy that would have "perverse" effects on the economy said, however, that they would co-operate with the newly elected government.
The party has no choice because it will soon be consumed with choosing a new leader. Former health minister Philippe Couillard and former finance minister Raymond Bachand are jockeying for position in the coming leadership race to replace Jean Charest.
The Coalition Avenir Québec, which supports the elimination of the health tax, may use the opportunity to demand aggressive cutbacks in government spending in exchange for its support of the PQ tax initiative when the National Assembly resumes sitting later next month or early November.
Mr. Marceau said he was willing to examine deeper cuts in spending programs than the ones the PQ had proposed during the election campaign and perhaps meet the CAQ halfway on some of its demands.
"Things aren't set in stone," he said "The initial parameters can change over time. Many things are possible. But I'm not saying that is what will happen. What I am saying is that we are open to negotiations. And we will take into account the fact that Quebeckers want co-operation and collaboration from the different parties."
The Finance Minister suggested that with the support of the CAQ a deal can be reached since together the two parties would have enough votes in the National Assembly to abolish the health tax. But, he added, it will mean a lot of give and take from both sides on how to pay for it.
And if the talks are successful, the climate of co-operation this time may set the terms for an even more important round of negotiations next spring when the PQ minority government tables its first budget and seeks political alliances to avoid being defeated.
Part of the coming PQ tax hike also included increasing the capital gains tax and reducing the tax credit on dividends. But Mr. Marceau acknowledged it would be more "complex" to proceed retroactively on these two measures.
The new tax rates would apply to approximately 140,000 taxpayers. However, few anticipated it would be applied retroactively for the 2012 taxation year. But the minister insisted that the government was committed to abolishing the $200 health tax paid by five million Quebeckers. And he vowed that when higher-income earners file their income tax next April, they will need to pay more to compensate for the $1-billion shortfall in revenue when the health tax is eliminated.
"We want to give the middle class some breathing room and free it from paying the health tax. It is important for us to ask a greater effort from the wealthier taxpayers," Mr. Marceau said. "I'm not prepared to abandon the spirit of our proposal. We were elected. We received a mandate. We made commitments and we want to deliver on the [election] promises that we made."