Vancouver Sun
Friday, March 2, 2007
Page: A12
The property tax gap must be tackled in a fair and economic fashion
Business owners pay nearly six times as much property tax per $1,000 of assessment as homeowners in Vancouver, and no rationale can justify the imbalance.
To put this in real numbers, the tax rate for residential property in 2006 was $2.66 per $1,000 of taxable value, and for business property it was $15.48 -- which works out to a business-to-residential tax rate ratio of 5.8.
As a result, business carries 52 per cent of the tax burden although it accounts for just 16 per cent of the value of taxable property, while residents pay 45 per cent of the tax but account for 83 per cent of the property value.
(Other property classes such as recreation, utilities, non-profit and farms pay the remainder.)
In fact, Vancouver has one of the highest business-to-residential property tax rate ratios in the country. The ratio in Edmonton is 2.19, in Halifax 2.54, in Calgary 2.57, in Montreal 2.64 and in Ottawa 3.09.
Vancouver city council established a property tax policy review commission last September which conducted two open houses earlier this month. Participants were invited to respond to two questions: How much tax should be paid by residential and non-residential properties and what methods could be used to make property taxes more predictable year to year.
The commission is due to make recommendations by June. It's unfortunate that its mandate was not broader, allowing it to lay the foundations for more comprehensive reform.
In any case, the Non-Partisan Association-dominated council has at least acknowledged the disparity by approving a shift of one percentage point to residential from commercial properties last year. At that rate, it will take many years to right the wrong.
Still, it's a vast improvement over the previous COPE-led council, which rejected a similar shift. The party hasn't changed its position.
The argument in support of a higher tax rate for business is that property taxes are a legitimate expense against profit, thereby lowering business income taxes. But this benefit doesn't narrow the gap significantly.
The arguments in favour of a more reasonable ratio -- say, 2.5-to-one -- are more compelling.
As Vancouver Sun columnist Don Cayo pointed out in an article recently high taxes are driving businesses out of town (or out of business), and they are often replaced by residential condominiums.
The cost to the city of providing services to the residential units can be far higher than it was to the departed businesses, but the tax collected is much less.
Vancouver needs local businesses -- restaurants, barbershops, dry cleaners, convenience stores, bakeries and second-hand stores -- to maintain sustainable communities. Sustainability is supposed to be one of the principal goals of city government.
These businesses not only provide goods and services to their communities, they create jobs and, of course, pay taxes.
There should be no need to increase residential property owners taxes to rebalance the tax load. Instead, city government will have to become more efficient and rein in spending.
The journey along the road to municipal financial reform may be long and arduous, but it has to be undertaken -- and soon.
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