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Demystifying the economy | Why is taxable income not identical in Quebec and Ottawa?



Every week, you send your questions on the economy, finances, markets, etc. Our journalists try to answer them with the help of experts.

Hello, A question that has been bugging me for several years with the receipt of my tax slips. Why is the amount of employment income different on my federal T4 slip and on my provincial RL-1 slip? How come our governments can’t agree on the same definition of employment income? THANKS.

Francois Chouinard, La Prairie

It’s simply Maurice’s fault.

Indeed, Prime Minister Maurice Duplessis passed a provincial personal income tax of 15% on February 24, 1954.

For the “Chief”, recalled the historian Robert Comeau on the occasion of the 50e anniversary of the act, having its own fiscal means was important for the province to exercise its own powers.

The difference between the employment income appearing on the federal T4 and the Quebec RL-1 is a consequence of Quebec’s tax autonomy, explains Tommy Gagné-Dubé, professor of taxation at the University of Sherbrooke.

“Quebec has fiscal autonomy that the other provinces do not have,” continues the academic. Quebec can make tax policy decisions different from the federal one. All provinces except Quebec, at the individual level, have a tax collection agreement with the federal government. Under these agreements, the provinces must have the same definition of taxable income as the federal government. »

In short, Quebec and Ottawa each have their own definition of taxable income, hence the differing amounts appearing in the T4 and the RL-1 slip.

The big chunk explaining the gap: Quebec considers employer contributions to a private health insurance plan to be taxable income, unlike the federal government.

“For Canada as a whole, approximately 13 million individuals received benefits from an employer-paid health or dental plan in 2018,” says Professor Gagné-Dubé.

There are other less important differences which come into play in the calculation of taxable income, such as the taking of meals during overtime. It is not taxable at the federal level, but it is in Quebec.

On the other hand, the expense allowances of elected municipal officials have recently been taxable at the federal level, Mr. Gagné-Dubé tells us, but they are still not in Quebec.

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