Vancouver Sun
Wednesday, April 18, 2007
Page: D3
Section: BusinessBC
By: Don Cayo
Council to consider tax burden
How much of a break can businesses expect -- and how much of a hit is in store for homeowners -- when Vancouver councillors sit down on Thursday to set 2007 property tax rates?
Two scenarios -- the top and the bottom of the range recommended by the city's property tax policy review commission -- are spelled out in a staff report released late Tuesday. Both reflect an earlier council decision to increase 2007 spending by 3.98 per cent.
Option One -- shifting one per cent of the total tax bill from a shrinking base of businesses to a growing pool of homeowners -- would mean an increase in the average residential bill by $91 a year and a rise in the average business bill by $185.
Option Two -- shifting two per cent -- would add $123 to the average residential bill and just $16 to the business bills.
But for the first time, staff also spell out what it would cost to give businesses -- who pay proportionately more in Vancouver than in any other major city in Canada -- what they've actually asked for through their 45,000-member Fair Tax Coalition.
Their request is for residents to swallow the entire spending increase this year. That would, in my view, send a powerful, positive message to a business community that has been badly treated by previous councils. And it might serve as a heads-up to homeowners, who've enjoyed services subsidized by business for years, and remind us to start paying more attention to how much city hall spends.
Interestingly, this option would add $127 a year to homeowners' tax bills -- or just $4 more than the commission's second option.
Council can, of course, choose any split it wants. But it generally chooses one of the options from the staff report. With the current options based on recommendation of council's own tax commission, that seems a safe bet again this year.
The business tax rate in Vancouver is currently six times more than what homeowners pay. It has gradually crept up thanks to an inflexible formula, still in effect, that divides the total tax bill between residents and businesses with no regard to the services they consume. Over the years, as residential growth strongly outpaced business growth, it has left a proportionately smaller business community with an undiminished portion of the bill.
Starting in 1994, councils have authorized a few small shifts in the proportion paid by each group. The current split is 55 per cent of the bill to non-residential taxpayers, down from 60 per cent at its peak.
The Fair Tax Coalition is pressing to eventually have the ratio decided by an up-to-date analysis of the cost of services that businesses and residents consume. But it has not pressed the case for this year, allowing time for the city's tax commission to complete a final report and present it in June. The commission's interim report, which recommended a shift of between one and two per cent this year, gave no hint of whether its final report will endorse this idea.
Meanwhile, the staff report calculates average increases for this year under the three scenarios, but the actual impact on specific homes will vary. Not only must the 3.98-per-cent increase in the total property tax levy be taken into account, but also the fact that assessments have risen dramatically -- but not evenly -- on all properties. The average residential property today is worth about $750,000, up 24 per cent from last year, and businesses assessments have increased roughly 21 per cent.
(To see how some representative properties would be affected by each scenario, see the tables at the end of the staff report here)
Councilors will no doubt be nervous -- as they should be -- about nailing residents with too large an increase.
But the business tax issue is serious. The number of businesses in the city has actually been shrinking for the past two years, and some neighbourhoods are staring to find themselves without some of the services they need when businesses move or fold and no new ones spring up.
If council opts for the one-per-cent shift this year, it will bring the ratio down to 53.5 per cent paid by business and 46.5 per cent paid by residents. The two-per-cent shift would result in a 47.5-52.5 ratio, as would the Fair Tax Coaltion's proposal.
But if the tax split was based on consumption of services, residents would be paying 76 per cent and businesses just 24.
So there's a huge inequity, and sooner or later it will have to be fixed. Much as I don't want to see a personal tax increase, I'd still vote for sooner.
dcayo@png.canwest.com |
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