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Unformatted text preview: ies. One frequently cited example is the tax deductions that encourage the use of pollution-free energy.
During the negotiation of the Lambermont agreement, an additional phase was completed by allowing not only tax
deductions but also all tax increases related to regional jurisdiction. Additional clarification was made during this second
phase of the negotiations: the accepted term is “tax reductions,” which must take the form of a tax credit, and not a “tax
deduction.” The difference is that in the first instance, the tax due is calculated according to the federal system and is
then reduced by the amount of the regional tax credit. The tax deduction, on the other hand, usually refers to a reduction
in the basis of assessment. This second technique should be rejected since the tax base is used by the federal
government, the regions, the provinces and the communes and the modification of the tax base by the regions would
affect the finances of the other entities. The alternative would have been to establish a second tax calculation, which
would have made the operation costly from an administrative standpoint. Consequently, in order to avoid errors of
interpretation, the term was modified between the Sainte-Thérèse and Lambermont agreement.
The second principle concerns the fiscal autonomy margins established in the Sainte-Thérèse agreement. The margins
were set at 3.25% until December 31, 2003 and 6.75% starting January 1, 2004. Consequently, the regions are
authorized to implement “general proportional additional taxes and general, lump sum or proportional tax reductions,
differentiated or undifferentiated by tax bracket, and to implement general tax reductions and increases,34 provided that
the sum of these measures does not exceed the maximum percentages” [OUR TRANSLATION]. These margins cover
revenues from the federal personal income tax localized in each region. These revenues are actually calculated prior to
the application of tax increases or reductions implemented by the regions and prior to the application of piggyback taxes
levied by the communes and the provinces. These tax reductions or increases do not, therefore, affect the transfer that
the regions receive from the federal government (the apportionment of which, between the regions, is based on the
Similarly, the equalizing transfer36 is calculated on the basis of federal personal income tax revenues and, therefore,
before regional fiscal decisions are made in respect of personal income tax. Were the opposite true, the amount of the
equalizing transfer would have been affected by regional additional taxes or tax refunds while the fiscal capacity of each
region remained unchanged. It is precisely this fiscal capacity and not actual tax revenues that must be considered in an
The September 16, 2000 agreement also stipulated that the regions would not be authorized to reduce the tax’s
progressivity. During negotiations in conjunction with the drafting of the legislation, two questions arose.
First, what is the reference progressivi...
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