Unfair to Residents
Part 1 of
For years business advocates in Vancouver have been complaining against a particular tax. When the facts are examined it is difficult to understand why. This tax is a small burden even if business had to bear it. In the end it is probably less than 2.5% of the total burden of taxes on business. It is a burden that has been declining for more than forty years. It is a tax for which business has already been provided with many benefits by the City. It is a tax that business will pass on to its customers. It is a tax, in the first instance, that business, unlike the homeowner, is able to deduct from its taxable income. This makes the intensity of the fight waged by business very questionable.
What can explain the extreme statements that are made by business advocates like the Board of Trade. the Canadian Federation of Independent Business, the Canadian Tax Federation, and political figures who read the pronouncements of such groups, and adopt them. Such groups have produced a whole series of unreasonable and distorted claims, about this tax, the property tax. These claims about its importance and weight have long since been dismissed by respectable studies including those produced by right wing groups such as the Canada West Foundation (Calgary), as well as by the leading scholars on the subject of property taxation in Canada.
The General Situation
In general, property is taxed in Vancouver in much the same way as it is in thousands of municipalities across Canada, including all the big cities. The amount of property tax, and the fact that businesses are treated as a separate class, as are homeowners, with almost all of th total city property tax recovered by fixed shares, contributed by each of these classes, business and residential, is much the same across the country, and this position has existed for many decades.
The property to be taxed , is divided into classes. In BC the amount of contribution from each class is fixed and may be varied by the municipality although it is established in the first place by Provincial statute. The municipalities in BC have the freedom to fix the proportion of the total tax or LEVY of funds required each year that will be paid by each of the two main property classes. The city can change some of the other classes that exist, small ones, as well, but these small contributors have special rules and formulas that are often set by other bodies or other legislation of the Province or by historical tradition. They only amount to 2% to 5% of the total yearly operating requirement or LEVY of the City.
We will not deal with them here. There is also a large school tax, but since the Province sets this tax, not the City, we do not deal with that here as the City appears to be a collector by compulsion of law, the Provincial law.
The classes of property in BC are created by a Provincial Act (the Assessment Act) which also establishes an independent Assessment Commission that decides the fair market value of all properties in the Province on an annual basis. With the Commission providing an independent valuation, the municipalities are then permitted to vary the property tax to be obtained from each of the classes of property owners. In the case of Vancouver this is done in a special Act, the Vancouver Charter.
Although there are eight classes, only two account for 98% of the property tax, and these are Residential, Class 01; and Business, Class 06. It is not clear how the smaller classes fit into this picture at 2% to 5% of the total amount of the LEVY since the figures vary a little from one source to another as to what they amount to.
[Task Force on Property
Taxation. City of Vancouver./ Report to Council; April, 22,1994 at pp. 11 to 13]
While these two big classes, business and residential, amount to almost all of the property tax, the shares are not equal, and this seems to be the basis of the continual agitation by business, which has obtained many favors from the City. The share of the property tax that is paid by business is greater than the share that is paid by homeowners. Referring to these classes as residential and business, the shares are 44% and 56% respectively. The policy of the City has been to try to keep the shares constant, but property values have increased within the residential share more rapidly than in the business share, and the ratio of business to residential is about 1:12 in property numbers so that there is a big difference between the shares of each class and the actual payments of the members of each class.
[City of Vancouver Policy Report April 28,2005-Director of Finance to Standing Committee on City Services and Budgets; and- Task Force on Property Taxation, 1994, page 13]
This distribution of property tax in which the property tax has classes of those who pay, that business pays more than residential, and that the two are treated separately from the other classes is also typical across the Province and the country. The actual proportions vary a great deal, as would be expected with each municipality able to set these proportions and change them, year to year, as their Councils may decide.
Part 2 to come
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