Gasps were heard across the Lower Mainland recently as property assessment notices landed and thoughts of, “My property is worth how much?” gave way to, “Holy mackerel, what does this mean for my taxes?”
It’s even worse for businesses.
On average, British Columbia small businesses will pay 2.6 times the municipal property tax of an equivalently valued residence. In many Metro Vancouver municipalities, this gap is far worse. For example, Coquitlam businesses pay 4.2 times more municipal taxes, while companies in Vancouver and Burnaby pay four times more than residents.
Let’s put this in monetary terms.
In 2015, an average residential property in Vancouver was worth $1,532,937. A resident would pay $2,713 in municipal property taxes on that value, while a small business would pay $11,260. A green grocer has to sell a lot of oranges to pay that bill.
This unfairness is even worse than it seems on the surface because businesses use fewer municipal services than residents. A 2007 report done by MMK Consulting for the City of Vancouver found that, on average, residential properties in the city paid approximately $0.56 in property taxes for each dollar of tax-supported service consumed, while business paid $2.42 in property taxes for every dollar of tax-supported services consumed.
One automotive shop owner comically captured how the inequity feels: “I know now what it must have been like for the peasants in medieval times, as far as having to pay taxes that amounted to a lot of nothing in return.”
His property tax bill is now more than $60,000. “It’s like paying an employee … but this one never shows up to work!”
Meanwhile, the province is as guilty of charging businesses more than their fair share on the portion of the property tax bill that is under their control. For example, in Vancouver, businesses pay 4.4 times more than residents in school taxes.
Showing leadership by reducing this inequity is something Finance Minister Mike de Jong should seriously consider for his upcoming budget.
Ninety per cent of businesses support the province limiting the amount of property taxes that businesses can pay relative to residents.
It’s not all bad news.
For businesses, the gap between what they should pay and what they do pay is still way too high, but it has been getting better in many municipalities, including Vancouver.
Another ray of hope for business is that there is greater understanding of the problem than there was 10 years ago. Residents care about small business because they contribute so much to our communities.
Increasingly, people understand that if governments are unfairly taxing small businesses, their favourite restaurants, dress shops, bakeries and dry-cleaners have less capacity to keep prices reasonable, create jobs, or even exist at all.
Laura Jones is executive vice-president of the Canadian Federation of Independent Business. She can be reached at email@example.com. Follow her on twitter @CFIBideas.