PROPERTY TAX IN VANCOUVER 3

Part 3

Tax Shares across Canada and some history

It can be seen that the different municipalities have a great range of variance in their tax policy on the residential and business split in property tax shares. It would be impossible to take a meaningful average or even a useful central number. One could say that where Vancouver business is complaining that the ratio is as high as 5 to 1 for the amount paid by business compared to the amount paid by residential (per $1000 of market value) they could always relocate, for example, to Thasis, where the ratio is very nearly 1 to 1. But then one does not expect a large business such as a department store like The Bay or a big building owner like Bentall or a large employer like the telephone company to do that, except for setting up small branch locations. Such businesses are in Vancouver because that is where the people are who are the mass of tenants, customers, or, employees that permit the development of large businesses that have need of many people, people with cars. One does not expect to find a Wall Mart in Thasis.


Why should the Vancouver ratio be even compared to Thasis? Where is this Vancouver Island metropolis' international seaport and container docking facilities; where is their international airport; their transcontinental rail center; the million plus concentration of population made easily mobile to the whole Lower Mainland area by a super modern road, rail,Skytrain, Seabus, and cheap bus network. In fact it would be very easy to go on with as many tag lines as are found in the tourist propaganda used by business to lure employees and customers to Vancouver, including sports stadiums, mountain chair rides, water pleasures in a harbor littered with little sail boats and all the way up to giant ocean liners. There is no rational basis for any business claim for any sort of "fair"average when this is the range in the distribution of municipal types.

The same is true across Canada. If we consider the largest seven Western cities we find that the the business versus the residential share of property tax ranges from 1.9 in Regina to 5.3 in Calgary (greater than the claim business makes against Vancouver). That is to say the business tax actually paid by business as its share in Calgary is 5.3 times the residential tax. Vancouver is second at 5.2 with Edmonton at 3.4 and Victoria is 2.6. The average of the seven western cities is 3.3. Once again we see the range is so great that we could not fix a reasonable average as a class or central tendency. We could also notice that these figure are from 2001, and Vancouver is not the highest, for that is Calgary, known to be place seething with extreme pro business propaganda.

[Canadian Federation of Independent Business; April 11,2005. Submission to Saskatoon City Council; Commercial to Residential Property Tax Ratios, Page 1--no source is given except CFIB calculations but the numbers are the same as found in another CFIB publication in 2004 titled Alberta's Property Tax System where there is reference to the source as the Government of Alberta, Department of Municipal Affairs for the Alberta numbers].

The Vancouver level of business tax is greater than what is stated for some other cities in part because in Vancouver a business tax which existed until 1983, was shifted in that year to the property tax, and the separate business tax on the value of rented property was discontinued. After 1983, there is no separate business tax in Vancouver where the property tax was reworked to add in the business tax (a $36 million transfer at the time). While such a tax does continue in cities like Calgary, Edmonton, and Winnipeg. In fact, Calgary recently complete a several year study and concluded the City should keep the business tax, as well as the property tax, so the argument for the business tax reduction as constantly made in BC would not fall on
fertile ground in in Calgary.

For this reason one has to add the business tax to those other cities before making a comparison to Vancouver. The comparison we have chosen here,is one that we found published by the Canadian Federation of Independent Business. This is one of the more extreme of the business advocates continually attacking the business share of the tax right across the country. In their writings it seems they do not believe any share greater than 50% is fair, and since they never actually say what share would be fair, one suspects that if the share was 50% they would stop demanding a level playing field and turn to some other complaint (such as what a hard time small business had making a dollar-as though the ordinary home owner did not- even though the property tax is deductible from Federal and Provincial Tax for business but not for the homeowner).

[CFIB-Submission to Saskatoon City Council Re: 2005 Operating Budget, April 11,2005]


In other words, even if the Vancouver business share translated into an actual total payment at a ratio of 1:1 for business, in order to make a comparison with the other large cities in Western Canada, on the basis of the tax rate (not the share of the LEVY)) one would have to add the business tax revenue, as it would total today, to the business tax to add up their payment obligations in Vancouver which they must maintain in addition to the business property tax. The ratios stated for the other cities need to have the two taxes added together, for a comparison.

But it is clear that when the business tax was ended it was not canceled but moved over, added, to the existing property tax in Vancouver:

"The business tax was phased out over three years, however the city did not
reduce its' revenue requirements. The foregoing business tax revenue was added
to the assessment based property tax levy. By 1985 this represented a transfer
of approximately $36 million from the business tax to assessment based taxes."

[Letter , Director of Finance, City of Vancouver, August 16,2004; Response to personal inquiry]



The reason for this is not clear but it seems to be related to the Expo 86 effect when many property values rose a lot from 1981 forward, and there was a good deal of property speculation, as there were expectations of financial rewards associated with the six month Expo 86 Exhibition. This must have led to big change in the mass of residential and business property values which would lead to a jump in the amount of property taxes payable by business, whether or not there was a similar rise in business properties value due to the number of properties, because of the business share of the LEVY and the effect of the relative numbers. On the other hand there are accounts which speak of a rapid rise of rates within the business class. The City had not yet, as of 1983, been awarded the right to set variable rates for the classes of properties. Since these matters became uncertain with the calling of an election, the City considered the only way it could redistribute with certainty some of the LEVY to the residential side was by this means. It is not clear why that should be a goal of City finance at all, but this is the account that this writer has seen bits of in the various City documents. This then may be yet another example of the City helping out business, as has been done so often.


Part 4 to follow