Part 6
Other Arguments Put Forward by Business Advocates
We have mentioned that business seeks to claim that it is somehow unfair that there is any disproportion in the tax shares paid. This seems to be largely an argument put forward by implication since there is no direct commentary on it, but that is what must be inferred from an argument like that set out by the CFIB in its submission to the City of Saskatoon in 2005, where we see the following at Paragraph 2.2:
"2.2 Property Tax Misconceptions-many people believe that business should face
higher property taxes than residents, that the tax gap is, in fact warranted. It
is a commonly held view that business should pay more because they have a
greater ability to pay and are able to deduct property taxes from income taxes.
However, these reasons are misconceptions and it is important to set the record
straight."
[CFIB web page. Submissions to Saskatoon City Council Re Budget; April 11,2005; Para. 2/2]
We would think the first point for the business advocate to explain before complaining about the distribution of shares is to explain why there is any uneven distribution at all, why there are separate classes, and how the existing distribution came to be at all. This they fail to do. Since they say that it is unfair that business should pay more and this is based on a misconception, they are saying by implication businesses should not pay more at all. But the only evidence on this point at all that can be found in the record is the vague impression conveyed to the KPMG accountants in 1995, which confirms that business believed it should be paying more than residential.
In the next paragraph, they set out as follows:
"A lasting but inaccurate justification for imposing higher property taxes on
business has been that they are better sable to afford it. This is simply not
true. Many small firms operate on very tight profit margins and when high
property taxes squeeze these margins further, they have fewer resources to put
back in the business. As a result, firms may have to forgo opportunities for
expansion which means job creation opportunities are also lost."
[CFIB- Brief to Submissions to the Saskatoon City Council; Re: 2005 Bidget; dated
April 11,2005, Page 2.]
Taking these points in order, we see again that the argument is being made that it is simply unfair that there should be any higher property taxes on business than there are on residential owners. The complete failure of the business advocates to explain or comment at all on the fact that the distribution is similar all across Canada as a pattern of the taxes payable by the business class being a multiple of those paid by the residential class, operates as something of an admission that there should be such a distribution. In other words, the only question left is whether the distribution is somehow unreasonable in the case of Vancouver where it is apparently reasonable for just about everyone else in the country. This is perhaps the most outstanding feature of all business propaganda on the different shares of the property tax, a very loud silence on the question of where did it come from and why is it there at all. We have to note that the share paid in Vancouver by business is not much different from that paid in Calgary (tax ratio of 5.33 according to the CFIB at 2004) let alone Toronto where the business share is 64% of taxes paid, that is, the shares division of the two classes alone is that high.
[City of Vancouver, Policy Report; Finance Director; Committee on CS&B, April 28, 2005, Page 12; where Toronto non residential % of total tax LEVY is stated at 64%]
The next argument made has to do with tax deductibility, and here the business advocates say as follows:
"The argument that business benefit from a tax deductibility of property taxes
and therefore they can absorb higher tax rates does not stand up either. It
presumes that all businesses are able to benefit from tax deductions. Business
that are struggling, just breaking even, or losing money don't receive a
deductibility "benefit" ".
[CFIB Submission to City of Saskatoon; April 11, 2005, Page 2; and see also CFIB
Property Tax Inequities in BC; (2003) at Page 6 (which can be obtained on CFIB web page).
The Statement is wrong in a number of ways. First of all, if a property owner cannot pay their house taxes, they cannot phone up the City and say: "Hello fellows, I haven't got it for you this year, had a bad year due to layoff, etc. Phone me in a couple of years and I will let you know if I can afford it then.: If the homeowner does not pay his property tax, he will be assessed a penalty by way of a punishing claim for interest for several years and if he cannot pay it all off by three years, the city will put the property up for sale in order to obtain payment of the taxes and interest. In general there is no ability of the homeowner to throw off his tax obligation and so there is no basis for the business to argue that they should either. There can be delays, or deferments, but these measures do only that,defer what must be paid. They are usually done to favor business as well and mean that all the ratepayers in the class who do not receive them have to pay more since no one can reduce the tax LEVY as the City is not allowed to operate on a deficit. In result such measures just ratchet up the regressive features of the tax.
As to whether or not the business may "benefit" from the deduction we doubt there is a business that will not claim it, or fail to include it proportionately in the price of its good or service. The fact is that from a tax deductibility point of view it is not a matter of it being some kind of a deductible benefit, the simple fact is that a business must either own property or rent it to use as a place to bring its employees to work on material to make a product or a service and sell it.
All of the costs of that productions are what the business is doing, and the property taxes are much the same as an other other expense which must be paid in order to produce a product or service and sell it. Whether the business is doing well or not is beside the point, just as it would be for a homeowner. So this argument is not valid in terms of the equivalence or the payment obligation of the different classes. The home owner has to pay it all; business can deduct it all. Does business expect a deduction greater than 100%?
Another claim put forward by business is that the homeowner is not taxed on the capital gain when the home is passed on to the next generation and this is somehow unfair to business. This is a deferment, not a tax reduction, and even where the gain is taxed at a specially low rate it hardly compares with the fountain of tax favors that go to business. The fact is business is able to benefit from a very large number of subsidies, exemptions, favorable rules, grants, special low interest provisions (like the capital gains exemption for small business) all apparently based on some idea of public policy to aid business. It has also long been public policy in many advanced western countries to favor economic activity and social stability by encouraging home ownership. This leads to a policy of eliminating capital gains on the principal residence where the ratepayer lives as well and refusing to introduce imaginary or "imputed" rent on one's own home.
Ownership of the home is the main and often the only significant property that is owned by the majority of the population which until recently did not have much stock ownership and even now mainly hold institutional claims in the form of tax deferment (Registered Retirement Savings Plans or RRSPs) to support retirement. It is an important influence on the distribution of wealth, and it is clearly vital for the majority of the population to have some stake in the social order for the goal of social stability. House values will not jump to the same beat as volatile stock market changes so that the goal of maintaining social stability is best advanced by broader home ownership, at younger ages, across most of the general population as a valuable social goal. So far as meeting any claim that such a policy is "unfair: to business, the first answer is simply that this is nonsense, but even if someone thinks it is unfair this is an intended unfairness. The community, which in this case is the nation, has decided that social stability and other goals of the nation, including supporting house construction, are usefully advanced by this policy.
Part 7 to follow
Showing posts with label property tax tax vancouver business homeowners. Show all posts
Showing posts with label property tax tax vancouver business homeowners. Show all posts
Saturday, September 15, 2007
Sunday, September 9, 2007
PROPERTY TAX IN VANCOUVER 5
Part 5
Misrepresentations of business advocates
As we have noted, the Vancouver Board of Trade [see Board of Trade Events Calendar, published March 16,2005] claims that business was unfairly paying huge subsidies and
we have quoted their bold claim:
"Business has paid huge subsidies in property taxes. Property taxes paid by
business to city government-and particularly the civic property tax on business properties in the City of Vancouver-are badly distorted."
One difficulty with this argument is that nowhere in the business propaganda does on find any explanation of how it comes about there is a disproportion between the business and residential tax share,or how the history of that developed, or why the business share in Vancouver is any more or less unfair than anywhere else in the Province or the Country. In dealing with this matter at City Council over the years, there has been quite a surprising vagueness about this critical historical fact.
At the time when business advocates were particularly vociferous, the Vancouver City Council retained some accountants to make a study. In this study, which was brought to Council at March 17, 1995, the accountants did not state that any particular policy was preferred but simply that there appeared to be some kind of consensus:
"While further work would be required to address these other issues, much of the
impetus for the study has been concern from the business sector that the
present tax rate and consumption ratios are too high. It is not necessary at
this stage, to define the 'ideal' long run relationship so long as it can be
agreed that the preferred long run consumption ratio is no more than 3 to 1."
[Project Report; Study of Consumption of Tax Reported City Services; Volume
1;Main Report; KPMG, Page 7]
As we stated earlier, it was after this report that on five of ten years, the city did effect a systematic shift, loading many millions of the tax onto the residential ratepayers.
We note however that there is an avoidance of any appearance of recommendations in the report. At Page 33, the consultant's comments were as follows:
"The selection of the preferred long-run target policy is a subjective one.
Most of the individuals with whom we reviewed this issue, have acknowledged
that there should be a distinction between residential and business properties.
There is considerable support for the view that the target consumption payment
ratio should be not more than 3 to 1. In the long run, we understand that much
of the impetus for the study has been a concern from the business sector."
It is quite clear from this quotation from the consultant's report, that no recommendation is attached, indeed they have very nearly framed the words in neon lights, that what they are submitting to the Council, is what the business interests have presented to them. And this has to do not with class shares but the tax rate
and what members of each class pay per each $1000 of market value.
All the more strange then that we often find in the publications of the business advocates the constant complaint that the tax is unfair because business does not vote, that business is shouldered aside in the municipal government. The truth, as regards the history of property tax policy, is that a great deal of the adjustment and measurement, and studying, and introduction of delays, caps, three year averaging and continual revisions in the property tax shares (five times in ten years) has been in response to constant self obsessed complaints of business. When one considers the occasions when the residential interest was served, the fact is that the severely skewed distribution of values of residences in Vancouver means once again it was the wealthy rate payers who gained most, just as wealthy business did. Residential rate payers only gained a little bit in what has really been a series of favors mostly to business with a few to the rich residential owners. The same is true of the property tax deferment measures as to amount. Them as has, gets; as they say.
[For the recital of benefits to business, and residential since 1989 see City of Vancouver Report of Finance Director to Committee on CS&B April 28,2005; Appendix E at pages 1, 2]
This is true even in the few cases of relief, supposedly for the benefit of homeowners on fixed incomes, such as three year averaging. It is true that this procedure smooths out a big increase that may come in one year, but the total amount of taxes that needs to be raised in that year (the tax LEVY) is still the same. If one homeowner does not pay as much of it as the system requires then some other homeowner and ratepayer must do so since that is what the city needs to operate, and the Provincial law requires that there be no deficit. If one asks what rate payers will make up the difference it will be all the rate payers who do not benefit, and given the numbers, that means the great majority of rate payers who have property values at $500,000 or less (that is, more than 60% of business and more than 96% of residential at values under $1,500,000).
[Letter from City Finance Department; February 28, response to inquiry re distribution of property ownership]
That is about as regressive as you can get.
"It must also be recognized that many people truly do not care that their
houses have risen steeply in value because they do not have any interest in
selling and moving. In this sense the increase in their wealth is illusory. In
many of these cases, the increase in wealth is not matched by any increase in
income.It is also true however that to soften the blow for those receiving the
large assessment increases means that those whose assessments increased less
will to pay more in taxes than otherwise."
[City of Vancouver; Report of Municipal Taxation Review Commission ; March 1989; Page 22]
It may be noted that the ordinary ratepayers of Vancouver, the great number of residential homeowners, are generous in their disposition of provide for what is needful, while the business people are mostly cheap and constantly complaining:
"Angus Reid reported that 68% of business community members surveyed believe
the current level of property taxes they pay are too high, a full 22% more
than residents. Further, Angus Reid reported that over 60% of residents
surveyed supported paying an additional eight percent in property taxes to help
maintain the level of services they currently receive. This compares to only
one third of all business respondents supporting a 4% tax increase."
[City of Vancouver; Director of Finance Report to Committee on CS&B April 24, 1997. Page 1. See also Ipsos Reid poll reported March 31,2004, Residents Prefer Property Tax Increase over Municipal service Cuts; Press Release.This latter
survey is residents, but does not report business].
And this conduct, as indicated in the Angus Reid survey, is despite the fact that there is no doubt the property tax is severely regressive. The regressive structure of the tax has been noted in several studies of the property tax in Canada:
"A comparison of the results of the different models generates some useful
observations. Regardless of the model, each suggests that the property tax is
regressive at the lower levels of the income scale."
[Property Taxation in Canada; Harry M. Kitchen; 1992; Canadian Tax Foundation; Page 52]
The same hands-off theme that we noted in the accountants' report when no opinion supporting the claim for business tax relief was offered, has been echoed in the comments of the City Manager of the City of Vancouver over the years, most recently in a policy report relating to property taxation. This policy report was presented by the Direct0r of finance to the Standing Committee on City Service at April 28,2005.
[City of Vancouver Policy Report--Property Tax; April 28,2004, CS&B Committee)
In this report we find the following at Page 2:
"The city manager notes that establishing property tax policy, is one of the
most difficult decisions a council must make. There is no formula and no right
or wrong answer to the question of how the cost of the city's tax report
and services should be distributed among the various property classes. Every
municipality throughout the Province must determine how their taxation
objectives should be reflected in tax distribution."
The city manager's opinion, so far as one is stated in this report, is shown in the next two paragraphs:
"The business community argues that the taxes on business classes are
inequitable compared to the residential classes and proposes a major change
in how tax rates are calculated and in the distribution of the LEVY. The city
manager is not supportive of this approach, noting that the proposal could
result in considerable instability in the distribution of the tax LEVY from
year to year, a result that council would be unable to control."
"As to the question of whether the business sector is bearing an unreasonable
share of the tax burden, the answer is not so straightforward. In the mid 1990s
the Council acknowledged an inequity and in five of nine years in 1994 to 2003
approved shifts of the tax levy totaling $15 million from the business to
residential classes. However, no target distribution was ever established."
The report goes on to note that what business was proposing as of 2005, was a whopping 18% increase to the residential class or $82 million shifted from the business class. The clearly excessive character of this claim shows a lack of good faith by business and their advocates. The point we make here is, is that there has never been, and there is not today, any justification given for such a massive change in tax policy, which already favors business to an extreme degree. And we maintain that the already existing tax policy is to be found right across the country.
Returning to some of the representations made by the business propagandists, we have noted that in the submissions of the Canadian Federation of Independent Business
and the Vancouver Board of Trade, we have seen no mention of the transfer of the business tax, the fact that any comparability of Vancouver with other western cities has to start with adding their business tax to their property tax, or the full appreciation of the advantages of passing on a tax, and tax deductibility that go to business.
To the contrary, where they mention tax deductibility at all it is for the purpose of complaining that many small business have a hard time making their way, as though there was any relief at all for the residential homeowner. Of course there is not, in the great majority of cases, and after three years of non-payment (with interest added every year) the property will be posted for tax sale. Why does the same CFIB which is constantly complaining about the myriad subsidies it sees everywhere, calling for the small business owner to be subsidised to the amount of a tax it passes on, will deduct, and therefore does not finally pay? Such an argument would be contradictory but it would make about as much sense as many of the propositions one can find in the arguments of the business advocates, that is, no sense at all.
Accordingly, there has been a standard and well-established history of a disproportion in property tax between business and residential shares for many years in Canada, affecting thousands of municipalities, at least 153 in BC alone.
There is further reason for an extra element of disproportion in Vancouver noting the the cancellation of the business tax in 1983. The very recent comparisons with other Western cities show that Calgary collects even more than Vancouver from business (at 2001 according to the figures published by a business advocate) when the merger of the business tax is taken into account. Also there is the critically important fact that the Federal and Provincial tax treatment of homeowners and business is unequal for good and necessary reasons in Canada. Compare the US homeowner who can make all the deductions. None of these matters are reflected reasonably (or at all, for the most part) in the propaganda of the Vancouver downtown business interest.
One has to wonder what would happen if the Federal government stopped allowing any of the various deductions that business can claim on property, such as the property tax, as it now forbids homeowners. Would business seek to recover it twice? It has already claimed the property tax now is an unfair burden on business, and that is under present conditions when deduct can deduct it.
Part 6 to come
Misrepresentations of business advocates
As we have noted, the Vancouver Board of Trade [see Board of Trade Events Calendar, published March 16,2005] claims that business was unfairly paying huge subsidies and
we have quoted their bold claim:
"Business has paid huge subsidies in property taxes. Property taxes paid by
business to city government-and particularly the civic property tax on business properties in the City of Vancouver-are badly distorted."
One difficulty with this argument is that nowhere in the business propaganda does on find any explanation of how it comes about there is a disproportion between the business and residential tax share,or how the history of that developed, or why the business share in Vancouver is any more or less unfair than anywhere else in the Province or the Country. In dealing with this matter at City Council over the years, there has been quite a surprising vagueness about this critical historical fact.
At the time when business advocates were particularly vociferous, the Vancouver City Council retained some accountants to make a study. In this study, which was brought to Council at March 17, 1995, the accountants did not state that any particular policy was preferred but simply that there appeared to be some kind of consensus:
"While further work would be required to address these other issues, much of the
impetus for the study has been concern from the business sector that the
present tax rate and consumption ratios are too high. It is not necessary at
this stage, to define the 'ideal' long run relationship so long as it can be
agreed that the preferred long run consumption ratio is no more than 3 to 1."
[Project Report; Study of Consumption of Tax Reported City Services; Volume
1;Main Report; KPMG, Page 7]
As we stated earlier, it was after this report that on five of ten years, the city did effect a systematic shift, loading many millions of the tax onto the residential ratepayers.
We note however that there is an avoidance of any appearance of recommendations in the report. At Page 33, the consultant's comments were as follows:
"The selection of the preferred long-run target policy is a subjective one.
Most of the individuals with whom we reviewed this issue, have acknowledged
that there should be a distinction between residential and business properties.
There is considerable support for the view that the target consumption payment
ratio should be not more than 3 to 1. In the long run, we understand that much
of the impetus for the study has been a concern from the business sector."
It is quite clear from this quotation from the consultant's report, that no recommendation is attached, indeed they have very nearly framed the words in neon lights, that what they are submitting to the Council, is what the business interests have presented to them. And this has to do not with class shares but the tax rate
and what members of each class pay per each $1000 of market value.
All the more strange then that we often find in the publications of the business advocates the constant complaint that the tax is unfair because business does not vote, that business is shouldered aside in the municipal government. The truth, as regards the history of property tax policy, is that a great deal of the adjustment and measurement, and studying, and introduction of delays, caps, three year averaging and continual revisions in the property tax shares (five times in ten years) has been in response to constant self obsessed complaints of business. When one considers the occasions when the residential interest was served, the fact is that the severely skewed distribution of values of residences in Vancouver means once again it was the wealthy rate payers who gained most, just as wealthy business did. Residential rate payers only gained a little bit in what has really been a series of favors mostly to business with a few to the rich residential owners. The same is true of the property tax deferment measures as to amount. Them as has, gets; as they say.
[For the recital of benefits to business, and residential since 1989 see City of Vancouver Report of Finance Director to Committee on CS&B April 28,2005; Appendix E at pages 1, 2]
This is true even in the few cases of relief, supposedly for the benefit of homeowners on fixed incomes, such as three year averaging. It is true that this procedure smooths out a big increase that may come in one year, but the total amount of taxes that needs to be raised in that year (the tax LEVY) is still the same. If one homeowner does not pay as much of it as the system requires then some other homeowner and ratepayer must do so since that is what the city needs to operate, and the Provincial law requires that there be no deficit. If one asks what rate payers will make up the difference it will be all the rate payers who do not benefit, and given the numbers, that means the great majority of rate payers who have property values at $500,000 or less (that is, more than 60% of business and more than 96% of residential at values under $1,500,000).
[Letter from City Finance Department; February 28, response to inquiry re distribution of property ownership]
That is about as regressive as you can get.
"It must also be recognized that many people truly do not care that their
houses have risen steeply in value because they do not have any interest in
selling and moving. In this sense the increase in their wealth is illusory. In
many of these cases, the increase in wealth is not matched by any increase in
income.It is also true however that to soften the blow for those receiving the
large assessment increases means that those whose assessments increased less
will to pay more in taxes than otherwise."
[City of Vancouver; Report of Municipal Taxation Review Commission ; March 1989; Page 22]
It may be noted that the ordinary ratepayers of Vancouver, the great number of residential homeowners, are generous in their disposition of provide for what is needful, while the business people are mostly cheap and constantly complaining:
"Angus Reid reported that 68% of business community members surveyed believe
the current level of property taxes they pay are too high, a full 22% more
than residents. Further, Angus Reid reported that over 60% of residents
surveyed supported paying an additional eight percent in property taxes to help
maintain the level of services they currently receive. This compares to only
one third of all business respondents supporting a 4% tax increase."
[City of Vancouver; Director of Finance Report to Committee on CS&B April 24, 1997. Page 1. See also Ipsos Reid poll reported March 31,2004, Residents Prefer Property Tax Increase over Municipal service Cuts; Press Release.This latter
survey is residents, but does not report business].
And this conduct, as indicated in the Angus Reid survey, is despite the fact that there is no doubt the property tax is severely regressive. The regressive structure of the tax has been noted in several studies of the property tax in Canada:
"A comparison of the results of the different models generates some useful
observations. Regardless of the model, each suggests that the property tax is
regressive at the lower levels of the income scale."
[Property Taxation in Canada; Harry M. Kitchen; 1992; Canadian Tax Foundation; Page 52]
The same hands-off theme that we noted in the accountants' report when no opinion supporting the claim for business tax relief was offered, has been echoed in the comments of the City Manager of the City of Vancouver over the years, most recently in a policy report relating to property taxation. This policy report was presented by the Direct0r of finance to the Standing Committee on City Service at April 28,2005.
[City of Vancouver Policy Report--Property Tax; April 28,2004, CS&B Committee)
In this report we find the following at Page 2:
"The city manager notes that establishing property tax policy, is one of the
most difficult decisions a council must make. There is no formula and no right
or wrong answer to the question of how the cost of the city's tax report
and services should be distributed among the various property classes. Every
municipality throughout the Province must determine how their taxation
objectives should be reflected in tax distribution."
The city manager's opinion, so far as one is stated in this report, is shown in the next two paragraphs:
"The business community argues that the taxes on business classes are
inequitable compared to the residential classes and proposes a major change
in how tax rates are calculated and in the distribution of the LEVY. The city
manager is not supportive of this approach, noting that the proposal could
result in considerable instability in the distribution of the tax LEVY from
year to year, a result that council would be unable to control."
"As to the question of whether the business sector is bearing an unreasonable
share of the tax burden, the answer is not so straightforward. In the mid 1990s
the Council acknowledged an inequity and in five of nine years in 1994 to 2003
approved shifts of the tax levy totaling $15 million from the business to
residential classes. However, no target distribution was ever established."
The report goes on to note that what business was proposing as of 2005, was a whopping 18% increase to the residential class or $82 million shifted from the business class. The clearly excessive character of this claim shows a lack of good faith by business and their advocates. The point we make here is, is that there has never been, and there is not today, any justification given for such a massive change in tax policy, which already favors business to an extreme degree. And we maintain that the already existing tax policy is to be found right across the country.
Returning to some of the representations made by the business propagandists, we have noted that in the submissions of the Canadian Federation of Independent Business
and the Vancouver Board of Trade, we have seen no mention of the transfer of the business tax, the fact that any comparability of Vancouver with other western cities has to start with adding their business tax to their property tax, or the full appreciation of the advantages of passing on a tax, and tax deductibility that go to business.
To the contrary, where they mention tax deductibility at all it is for the purpose of complaining that many small business have a hard time making their way, as though there was any relief at all for the residential homeowner. Of course there is not, in the great majority of cases, and after three years of non-payment (with interest added every year) the property will be posted for tax sale. Why does the same CFIB which is constantly complaining about the myriad subsidies it sees everywhere, calling for the small business owner to be subsidised to the amount of a tax it passes on, will deduct, and therefore does not finally pay? Such an argument would be contradictory but it would make about as much sense as many of the propositions one can find in the arguments of the business advocates, that is, no sense at all.
Accordingly, there has been a standard and well-established history of a disproportion in property tax between business and residential shares for many years in Canada, affecting thousands of municipalities, at least 153 in BC alone.
There is further reason for an extra element of disproportion in Vancouver noting the the cancellation of the business tax in 1983. The very recent comparisons with other Western cities show that Calgary collects even more than Vancouver from business (at 2001 according to the figures published by a business advocate) when the merger of the business tax is taken into account. Also there is the critically important fact that the Federal and Provincial tax treatment of homeowners and business is unequal for good and necessary reasons in Canada. Compare the US homeowner who can make all the deductions. None of these matters are reflected reasonably (or at all, for the most part) in the propaganda of the Vancouver downtown business interest.
One has to wonder what would happen if the Federal government stopped allowing any of the various deductions that business can claim on property, such as the property tax, as it now forbids homeowners. Would business seek to recover it twice? It has already claimed the property tax now is an unfair burden on business, and that is under present conditions when deduct can deduct it.
Part 6 to come
Sunday, September 2, 2007
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
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
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