Tax Seminar Recap by Jeff Grad CA CBV MRICS AACI P.App PLE AEC International Inc.

11/30/2010 11:51

Municipalities treat small businesses like “cash cows” Two recent reports issued in Canada show that business owners continue to pay more than their fair share of property taxes. According to the recent report by the Canadian Federation of Independent Business (CFIB) - The Tale of Two Tax Rates: How Ontario and its Municipalities Tax Business Properties – there is a disproportionately high property tax gap between residential and non-residential properties in more than 200 Ontario municipalities. “While some progress has been made to right this injustice since CFIB last reviewed the gap in 2006, small businesses continue to be treated as cash cows by the property tax system,” stated CFIB’s director of provincial affairs, Satinder Chera. “It has become convenient for local governments to increase taxes on businesses to cover their budgetary shortfalls, resulting in an unbalanced property tax system that undermines job creation and economic growth.” With very few exceptions, municipalities have done little to recalibrate the rates for all property classes. For instance, in 2009, industrial owners in Pembroke paid over four times more in property taxes than residents (a tax gap of 4.39) on property of similar value, followed by Toronto (3.56) and Hamilton (3.33). In the commercial class, businesses in Toronto paid over three times more in taxes, followed by those in Owen Sound (2.3) and Kirkland Lake (2.21). This is certainly not a problem which is specific to only Ontario. Similar instances of this disparity in the levying of taxes are seen across Canada and the United States. On November 10, 2010, the Real Property Association of Canada released its 8th annual survey of property taxes across Canada. The “2010 Property Tax Rate Analysis” shows the ratio between residential and commercial/industrial properties of taxes per $1,000 of assessment. REALpac advocates, and common sense dictates, that an excessive burden on commercial and industrial tenants does not encourage further investment in a region and can cause a municipality to become comparatively less competitive for future growth. The report indicates that the average business pays $27.92 per $1,000 of assessment, while the average residence pays only $9.41. Among major municipalities, Vancouver is the “worst” with a ratio of 4.42, followed by Toronto at 4.33 and Montreal at 4.11. On the low end, Winnipeg has a ratio 1.41 and Edmonton has a ratio of 2.13. However, in terms of trending, Toronto and Vancouver have reduced their ratio in 2010 over 2009, while Montreal and Winnipeg have increased theirs – in Montreal’s case, quite substantially. The full reports are available on the CFIB and REALpac websites.