The Chamber has long expressed concern regarding local governments charging non-residential property owners some multiple over residential taxpayers, a practice that is not based on any concrete rationale, e.g. aligned with consumption of municipal tax-supported services. This practice affects businesses’ ability to compete with other jurisdictions and remain viable, impacts that will only worsen as property values rise and municipal costs increase.

Background

Prior to 1984, the Government of BC regulated ratios between residential and other property classes. This restricted local government’s ability to set arbitrary rates and restricted the difference between classes to between 2.6 and 3.5, depending on the class.

In 1984, the provincial government granted local government full autonomy in the setting of rates between the various classes. Property classes were then expanded to the current nine classes. This change allowed municipalities the maximum flexibility to allocate tax collection to distinct property types. In addition to the 1984 change, the Community Charter – introduced in 2003 – provided local governments extensive control over the methods of tax collection and the services that they may choose to fund.

In some provinces, municipalities are free to set their own property tax rates without provincial involvement while in other provinces, the province is involved in the local tax structure through direct controls or limitations on what can be done. For example, in New Brunswick, each municipality sets its own local property tax rate, but it is a provincial requirement that the non-residential municipal tax rate must be equal to 1.5 times the residential municipal tax rate. In Ontario, municipalities are permitted to set different tax rates (related to the residential rate) for different property categories although provincially set ranges of fairness limit a municipality’s flexibility in setting differential rates. In Manitoba, except for Winnipeg where differential tax rates may be used, municipalities are not allowed to apply differential tax rates to different property types.[1]

Property taxes actually refers to a range of components levied on behalf of a range of different authorities: municipal, school, regional districts, hospitals, transportation authorities, and others. Municipal property taxes are calculated based on BC Assessment’s assessed value on specific properties, the municipal budgetary requirements, minus all other sources of funding. It should also be noted that while these are all levied at the local level, only municipal components are fully under the control of the local governments.

Property tax rates vary by class of property: residential and non-residential, e.g. Industry, Business/Other,[2] Utilities, Supportive Housing, Farming, Non-profit, Recreational. The difference between residential mill rates and non-residential can be substantial; in Greater Victoria municipalities, the difference can vary from more than double to quadruple.[3]

The difference between residential and non-residential taxes is misaligned with the costs of providing services. In fact, studies have shown that non-residential property owners do not consume the tax-supported services of residential owners.[4]

The autonomy provided to local government, the variety of recipients of property tax, the setting of the tax rate, and the number of classes of property all lend themselves to a complex system that does not encourage openness nor transparency.

The Government of BC needs to ensure property taxation is fair, transparent, and sustainable.

The Chamber Recommends

That the Provincial Government:

  1. Provide control and oversight on the level of property taxation levied to all taxpayer groups to ensure fair, transparent, and sustainable taxation practices; and
  2. Commission a study to assess municipal property taxation with the goal of developing a more sustainable structure related to value for money.
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[1] Property Taxes and Competitiveness in British Columbia, May 2012

[2] Business/Other includes store and commercial services, office/commercial space, shopping centers, hotels, storage and warehouses, and strata non-residential.

[3] There is no publicly available information from the Ministry of Community, Sport and Cultural Development nor BC Assessment relating to the representative commercial property owner’s taxes.

[4] A 2007 report by MMK Consulting for the City of Vancouver found that, on average, residential properties in Vancouver paid $0.56 in property taxes for each dollar of tax-supported services consumed, while non-residential properties paid $2.42 for every dollar of tax-supported services they consumed.