PROPERTY TAX IN VANCOUVER 2

Part 2

Review of the shares

Despite the modest majority share contribution of business, the business advocates lose no opportunity to protest that this is unreasonable. In a Vancouver Board of Trade publication dated March 16, 2005 (found on their website) we see the following:

"Businesses pay huge subsidies in property taxes. Property taxes paid by business
to City governments-and particularly the civic property tax on business properties in the City of Vancouver are badly distorted."

The fact is that the proportions as stated above can scarcely be described as "huge" and they are to be found everywhere in the Country:




"The foregoing property tax comparisons have not separated the residential from
non residential components. This has been dictated by the fact that the data
for interprovincial comparative purposes are almost never separated according to
those two property classifications.

In addition comparisons of effective
property tax rates on residential versus non residential properties always
indicate higher effective tax rates on the non residential sector. This is not
surprizing: it has been a deliberate policy objective of all Provincial
governments, either through their assessment practices or through the imposition
of differential property tax rates, in effect if not by explicit policy, to
impose higher taxes on the non residential sector."

[Property Taxation in Canada. Harry M Kitchen, 1992, P.14]


According to the city manager's office, the distribution of shares has not changed greatly since the 1980s; as of 1984 residential paid 39.7% of the property tax yearly levy, while business paid 54.7%; and at 2004 residential paid 43.3% while business paid 52.8%. Council has long had a policy of maintaining fixed shares for the contribution of each of the residential and business sectors but there have been changes since 1995. The principal reason for year to year differences is that particularly since 1995 business interests have been able to persuade the Council that the existing shares were somehow unfair and over a number of years (at least five times since 1995) the Council has systematically transferred a series of share amounts from business to residential to a total of many millions of dollars making for an increasing burden to be paid by the residential class. The business share of the LEVY has gone from 54.7% in 1984 to 52.8% in 2004; while the residential share has gone from 39.7% in 1984 to 43.3% in 2004.

[Policy Report to Committee on CS&B; April 28, 2005; Appendix D page 2 of 7]


In other words, the homeowners' property tax burden has been increased while the burden for business has been decreased by five transfers over the past ten years, although the statement on shares does not show the absolute sums in terms of tax rates. In that matter we find that the tax rate for business has gone from $13.64 in 1984 to $16.75 in 2004. The tax rate for residential in dollar amounts has gone from $5.20 in 1984 to $3.06 in 2004.

[Policy Report Committee on CS&B; April 28, 2005]


Business usually states the amount of its payments as a ratio or tax rate which is the amount to be collected from the class compared to the total value of all the properties in the class. While business may be required, as at present, to pay a 56% share of the total amount of the property tax, there are other relevant numbers that complicate the picture. There are about 12,341 businesses paying the tax in Vancouver but 156,387 properties that are residential.

[Response to inquiry to City of Vancouver Finance Department, February 28,2006]


Further, the rate of change in property values over time in the city is often not closely matched, so that business properties may increase in value a a rate much quicker than residential, or vice versa. Or groups of taxpayers within a class may find that their property values are increasing much quicker than some others, or than the business, class, or than some other residential areas in the city. The resulting figures may also be clouded by relief measures that are put in place in some years but not others ,such as measures to defer the taxes that are paid, as by a delay, or an averaging method over three years.

In result, the working of this arithmetic produces a situation in which the class share of business may be in the 50% range but the tax payments required will be a rate which is the proportion of the tax to be paid by the class divided by the total value of all the properties in the class, and that rate multiplied against the value of the particular property in units of $1000. Business now claims that what it pays compared to what residential pays in terms of that rate is a difference of over 5:1 and should be 3:1 or even 1:1. The rate now in place has the business class paying at a rate of over $16 for each $1000 of any particular property value; while residential would b e paying at a rate of just over $3 for each $1000 of property value.

If we look at other towns in BC, we can see that the division of property tax into shares and the practice of business being required to pay an amount which may turn out to be a number of times the residential rate (not the class share) can be found throughout the Province. A summary table of municipalities, their shares and payments was attached to a publication by the Board of Trade at February 19, 2002, in a letter sent to a Provincial Government Minister.

[Letter February 19,2002. Vancouver Board of Trade to Ted Nebbeling ,Minister of State for the Community Charter. see Board of Trade web page.]


The list was based on "2001 Business to Residential Tax Rate Comparisons" and contains 153 communities in BC which appears to be all the communities of even modest size. The largest ratio in terms of amount actually payable by businesses was Kimberley at approximately 7:1 with Vancouver third at 4.9:1. The remaining communities go all the way down to 1:1. The communities that are less than 2 to 1 number approximately 30 of the 153. In Tahsis for instance, business as a class was to pay no more than residential, in property tax money at 2001.

One recalls that this is a list based on the tax rate, and so is a comparison of what the business taxpayer is obliged to pay when they multiply the tax rate for business by the value of their property in units of $1000. It is not a comparison of property tax shares. The source of this table is not given, so we are assuming that it is taken from a Government source. We note that in this document the Board of Trade is calling for a shares distribution of 2.5:1 although there is no obvious connection between the tax rate cited for Vancouver and that rate, and no explanation at all for the departure from the figure of 3:1 that business recommended to KPMG accountants in 1995 when a study was done by the accountants for the City on the matter. The figure or ratio of 3:1 is also spoken of today in business broadsides and letters to government. It appears this figure is not based on history, rates in BC or Canada generally, or rates in accord with any accounting convention. It is just picked out of the air.

Part 3 to follow