Quebec's New Incentives Emulate 'Irish Model'
When in Quebec, do as the Irish do.
It's certainly not a notion that would wash with Quebec's vocal separatist movement. Nonetheless, that was the gist of the most striking business recruitment message contained in Quebec Finance Minister Bernard Landry's recent announcement of the new provincial budget.
Unabashedly taking a page from Ireland's highly successful strategy, Landry announced that Quebec will now offer a 10-year tax holiday on major investment projects. Specifically, the 10-year tax break will apply to location projects that:
"We would do well to follow in the footsteps of the Republic of Ireland . . . a small country that has experienced phenomenal growth," Landry said in his budget speech.
"We are moving toward the Irish model," he added. "That should please a large number of our fellow citizens who trace their origins back to Erin's fair isle."
The new tax holiday continues Quebec's aggressive efforts to attract business, which are spearheaded by Investissement-Quebec (www.invest-quebec.com), or Invest-Quebec, the province's lead development agency.
In 1998, for example, a Quebec consortium of private companies and city and provincial agencies launched the Multimedia City (MMC) project in Montreal, an R&D complex that will house as many as 10,000 workers in 1 million sq. ft. (90,000 sq. m.) of space. Quebec's government provides companies that locate in the MMC with tax credits of up to $15,000 of each employee's annual salary until 2008.
The MMC is part of the successful strategy that Quebec has utilized in attracting R&D. In recent years, the province has landed a number of major high-tech investments from the likes of Ericsson Research, Excel Communications, Harris Farinon, Nortel Networks, Nortek and Motorola.
Landry's 10-year tax holiday further turns up the heat in Quebec's business recruiting.
More aggressive incentives were needed, Landry explained, to avoid losing major facility location projects to other areas like Ireland. The new budget, he said, "puts us in the game when we're competing with Ireland and certain U.S. states."
The new tax holiday will cost the government some $60 million a year within five years, according to government officials. (That figure, of course, doesn't take into account the potential economic benefits of the new jobs added to the provincial economy.)
Reaction from the provincial business sector was generally positive. However, some members of the Quebec business community said the province should be placing more emphasis more action on cutting capital and payroll taxes.
The most critical reaction came from the president of the Quebec Chamber of Commerce, who slammed the new tax holiday for favoring new projects over existing business.
The 10-year tax holiday, though, was the only part of Quebec's new budget. Other major planks of Landry's budget that have significant business location ramifications included:
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