Finance Minister Michel Audet delivered the Québec government's 2007-2008 Budget before the National Assembly today.

The following is a summary of the more significant tax and related measures he announced.

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MEASURES CONCERNING INDIVIDUALS

Personal income tax reduction

The marginal tax brackets used to calculate tax payable by individuals will be raised by approximately 9.2% effective January 1, 2008. The rates and brackets will be as follows:

As of January 1, 2009, the thresholds and ceilings establishing the taxable income brackets of the tax table will again be automatically indexed each year.

Improvement of the tax system pertaining to education

Introduction of a refundable tax credit to support education savings

Financial assistance will be paid through a refundable tax credit for the benefit of children who will be beneficiaries of a Registered Education Savings Plan (RESP). The application terms and conditions will be similar to the Canada education savings grant.

The credit will be granted to a trust governed by an education savings plan, up to a maximum of $3,600 per child on a cumulative basis. In general, the credit will be equivalent to 10% of the first $2,000 of annual contributions to an RESP for children under age 18.

The refundable tax credit to support education savings will apply as of the 2007 taxation year with respect to a Canada education savings grant that is attributable to a contribution paid to an RESP after February 20, 2007 and is paid for a calendar year after 2006 under the Canada Education Savings Act.

Transfer of the unused portion of the tax credit for tuition fees

The portion of the tax credit for tuition fees and examination fees that a student does not use to reduce his or her tax payable may, as of the 2007 taxation year, be transferred to one only of the student’s parents or grandparents.

Where a student transfers less than the maximum amount transferable, the student will be able to carry over the non-transferred portion for his or her own future use.

Enhancement of the tax credit for retirement income

The maximum amount of retirement income eligible for the non-refundable tax credit will be raised from $1,000 to $1,500 as of the 2007 taxation year.

Simplification of the refundable tax credit for child care expenses

An individual’s qualified child care expenses for a given taxation year will no longer be limited by the individual’s earned income or that of the supporting person of the child.

Enhancement of the refundable tax credit for the treatment of infertility

The refundable tax credit for the treatment of infertility will be changed to raise, from 30% to 50%, the rate applicable to the cost of a third or any additional attempt at in vitro fertilization. For greater clarity with regard to the number of attempts, a new series is considered to begin after the birth of a living, viable child.

These changes will apply to embryo transfers carried out as of the day following the date on which the Québec policy on in vitro fertilization comes into effect.

MEASURES CONCERNING BUSINESSES

Improvement to the capital tax credit

The rate of the basic tax credit will be doubled to 10% of the amount of eligible investments.

The assets covered by the 10% capital tax credit are class 43 manufacturing and processing assets acquired after today and before January 1, 2013.

Reduction in the corporate tax rate applicable to passive income

The tax rate applicable to passive (investment) income will be reduced to the tax rate applicable to active income ineligible for the small business deduction.

The new rates will become effective after February 20, 2007.

Measures concerning scientific research and experimental development

Change to the requirement to carry on a business in an establishment located in Québec

R&D expenditures incurred in a fiscal year that began after April 21, 2005 by a person or a partnership that carries on a business in Canada (but not in Québec) will again be eligible for the refundable tax credits for R&D. Such amounts can be included in a claim for a refundable tax credit for R&D by the later of the following two dates: August 31, 2008, or the normal R&D filing deadline for the taxation year in which such expenditures were incurred.

MEASURES CONCERNING CULTURE

Adjustments to certain refundable tax credits

Amendments will be made to the following refundable tax credits in the cultural field:

• The credit for Québec film and television production
• The credit for film production services
• The credit for dubbing
• The credit for the production of shows
• The credit for sound recording production
• The credit for book publishing

MEASURES CONCERNING CONSUMPTION TAXES

Refund of Québec sales tax paid on a hybrid vehicle

The QST system will be changed to double the maximum amount of this refund to $2,000. This measure will apply to a new hybrid vehicle that has been purchased or for which a long-term lease has been taken out after February 20, 2007 and before January 1, 2009.