A report by Altus Group says that in eight of the 11 cities surveyed, commercial tax rates are at least double those of residential tax rates. This indicates that a commercial property would incur property taxes more than twice the amount of an equally valued residential property.
“The commercial-to-residential tax ratio is still far from being fair as we continue to see several cities across Canada shifting the burden of property taxes to business owners,” says Terry Bishop, president of Property Tax Canada at Altus Group. “Municipalities should recognize that bringing down the commercial property tax rate is important to help make their cities more appealing to businesses, which helps create job growth and leads to sustainable revenue for the city.”
For the 13th year in a row, Vancouver saw a decrease in commercial tax rates in 2018 with the largest drop of all the cities surveyed at 12.782 per cent. However, the report says that given Vancouver’s high commercial property assessments, significant pressure is being placed on businesses. Despite this decrease in the commercial rate, Vancouver continues to post the highest commercial-to-residential ratio. Instead of further balancing the commercial-to-residential ratio, Vancouver introduced new property taxes targeting foreign buyers and high-value properties, which broadens their tax base, the report says.
Calgary saw the largest increase in commercial tax rates in 2018 for the second year in a row, with a jump of 9.478 per cent. As the downtown office market continues to struggle with high vacancy, Calgary is experiencing a drastic shift of tax liability towards the commercial tax base, as opposed to the residential tax base, says the report. This has resulted in industrial and retail properties seeing unprecedented tax increases over the last four years in Calgary.
Quebec City has one of the highest estimated commercial taxes per $1,000 of assessment at $36.09, just below Montreal, which remains the highest of all cities surveyed at $37.76. One factor contributing to the high commercial tax rates in Quebec is the lack of specific taxes on services such as water, which many other Canadian cities charge to offset high property taxes. While the commercial-to-residential tax ratio in Quebec City has increased steadily since 2003, including a jump of 7.380 per cent this year, Quebec’s residential property tax rate experienced the largest drop in rates anywhere in Canada in 2018 with a decrease of 7.468 per cent, says the report.
It also examines the property tax ratio on multi-residential properties, which compares the residential property tax rate to the multi-residential property tax rate. The findings indicate that Ontario renters are carrying a disproportionate burden of property tax. While multi-residential building owners are being taxed equally to homeowners in most of Canada, Ontario cities are showing that apartment buildings built before 1998 carry significantly higher ratios with Ottawa at 1.358 and Toronto leading the pack at 2.069. The higher levels of taxation on older multi-residential buildings can pose a challenge for landlords needing to fund repairs and maintenance, and as a result, are often passed onto tenants through increased rent, says the report.
Download a copy of the Altus Group 2018 Canadian Property Tax Rate Benchmark Report here.