Quebec science policy accelerated as part of deficit-fighting public spending package

Budget delivered five months early

Research infrastructure tied to Quebec’s recent science policy was a beneficiary of the provincial government’s early Budget, highlighted by massive capital spending to help ward off the impact of the current economic slowdown. By pushing the Budget ahead five months (it was table presented November 1), injecting the equivalent of 0.7% of GDP into the economy while maintaining its zero-deficit policy, the Parti Quebecois regime hopes to avoid the worst effects of the slowdown.

The Budget adds $100 million to the $250 million fund established for the Ministry of Research, Science and Technology (MRST) which was announced in the spring (FY01-02) Budget to finance research infrastructure over three years. The new money is being pitched as an acceleration of the science policy’s implementation, although far more was originally considered when the policy was unveiled (R$, February 12/01).

“This new money is part of the public sector investment action plan for accelerating investment to combat the economic down cycle”, says Camille Limoges, MRST’s deputy minister. “Some of the $100 million is related to the optics and photonics research centre at Laval and there will be a series of other announcements in the days and weeks ahead. This is the Budget for FY02-03 so there won’t be a budget in the spring unless the economic situation deteriorates and requires new measures.”

Like the initial $250-million in funding, the new money will also be borrowed and MRST is being provided with additional funds to cover interest payments over the next several years. Limoges says that MRST’s science policy-related initiatives were not conceived to be financed using such a mechanism and he notes that none of the new money covers operating costs.

“MRST had not expected to have this type of financing program, unlike the ministries of education or health which normally use this type of financing. Now we are building much more quickly with the $350 million we have received than when we originally wrote the policy,” he says. “It’s excellent news from our perspective, but money will be needed to run these facilities. More will be required for operating budgets but these have not grown at an ideal rate.”

In addition to the Laval optics research centre, $20 million of the new funding will go towards a major expansion at the Clinical Research Institute of Montreal, a large research centre affiliated with the Univ of Montreal. Another $8 million will be devoted to a new $10-million building at the National Optics Institute in Ste Foy near Quebec City. And A marine biotechnology centre in Rimouski will also receive significant funding, with details to be announced in the near future.

Outside of MRST’s funding envelope, the Budget provides for $1.9 million in funding for the construction of a test bed for three wind turbines in the Gaspé region. The funding will facilitate a demonstration project for adapting the wind turbines to the Quebec climate. Once the windmills have been constructed, Hydro-Quebéc has agreed to purchase the generated power.

In the weeks ahead, funding will be announced for the Technopole project at the Univ of Montreal, although government support will be just one of several funding sources.

From the Finance ministry, $2 million over two years is being directed towards the Centre for Interuniversity Research and Analysis on Organizations (CIRANO).

HIGH TECH ZONES

The Budget also made adjustments to the government’s policy of establishing designated sites for specific technology sectors. The changes implicitly acknowledge that the presence of some of these zones has had an adverse impact on businesses outside of the tax assisted zones, particularly in the area of e-commerce.

As a result, the original E-Commerce Place project— announced in May 2000 — is being significantly downsized from 268,000-sq.m of leased space to 139,500-sq-m. At the same time however, two other existing zones in Montreal and Quebec City — the Zone de commerce électronique du centre-ville de Montréal and the Centre national de nouvelles technologies de Québec (CNNTQ) — are being expanded.

OTHER TAX MEASURES

For all sites, the tax credit for corporations that set up shop in the high tech zones is being increased from 25% to 35%, raising the credit per eligible employee from $10,000 to $12,500 on an annual basis. For firms that sign leases in 2001, 2002 and 2003, the 10-year period of tax credit eligibility will apply, effectively extending the program to the end of 2013.

Tax enhancements and extended eligibility periods were also announced for several other high tech tax assistance zones, including new economy centres (CNEs), information technology development centres (CDTIs), Cite l’optique in Quebec City, Technopole Angus (Montreal) and Cité de la biotechnologie et de la santé humaine du Montréal métropolitain.

The Budget introduced measures to stimulate more private investment in smaller firms by initiating a capital tax reduction plan. By 2007, Quebec’s capital tax rate will be reduced from 0.64% to 0.30%, reducing the gap with other North American jurisdictions. The Quebec rate is currently the highest on the continent — a situation Finance minister Pauline Marois says is prompting large firms to move and smaller companies to establish their businesses elsewhere.

Legislation was also introduced to improve liquidity for smaller firms by granting an extension to the deferral of payment of income tax and tax on capital installments. The grace period applies to firms with less than $15 million in paid-up capital and now totals eight months.

The Budget also made adjustments to the refundable tax credits for firms that enter into research contracts with universities. A clarification is being added to tax legislation so that contract research work carried out by an affiliated medical research centre will also be eligible, as long as an advance ruling on eligibility identifies the affiliate conducting the research. The amendment applies to research contracts which received an advance ruling after November 1/01.

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