A new report says that in eight of the 10 Canadian cities surveyed, commercial tax rates were at least double those of residential tax rates. For the 10th consecutive year, Vancouver, Toronto and Montreal posted the highest commercial-to-residential ratios in the country.
The report by Altus Group in partnership with the Real Property Association of Canada, says governments face the ongoing challenge of funding municipal budgets while trying to manage the perceived fairness of the different property tax rates paid between commercial and residential taxpayers.
“With the increase in property values, tax rates should trend lower as municipalities are able to collect the same amount of tax revenue given that the higher property values create a larger assessment base,” says Terry Bishop, president of Property Tax Canada at Altus Group. “A lower commercial property tax ratio should help make cities more competitive, promote job growth and can help to generate more stable and sustainable revenue.”
While both commercial and residential property tax rates in Vancouver saw a decrease in 2017, the ratio between the two increased by over 11 per cent to 4.87, the highest in Canada, says the report. Vancouver is the only city to post a commercial-to-residential tax ratio of more than 4:1, well above the average of 2.85:1.
“The city’s record-breaking housing market provided a potential opportunity to adjust the residential tax rate and close the gap between residential and commercial tax rates. However, the city of Vancouver elected to decrease its residential property tax rate by almost 20 per cent over the last year while the commercial rate only decreased by 10 per cent driving the commercial tax ratio up,” says the report.
For a 13th year, Toronto’s commercial-to-residential tax ratio declined, decreasing to 3.81. However, despite the multi-year downward trend, this year showed a slight pause with a less than one per cent decline from the previous year, says the report. “This means commercial rates will need to decrease further if the city is to achieve its goal of improving the business climate and increasing competitiveness with its target ratio of 2.50 by 2023.”
Montreal has the highest commercial property tax rate in Canada. It halted a 10-year upward trend by decreasing its commercial-to-residential ratio to 3.77.
The report 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,” says the report. “While renters are being taxed equally to homeowners in most of Canada with an average ratio of 1:1, Ontario cities are showing that apartment buildings built before 1998 carry significantly higher ratios with Ottawa at 1.38 and Toronto leading the pack at 2.21. The higher levels of taxation on older multi-residential buildings can pose a potential challenge for landlords looking to direct funds to needed repairs, maintenance and building infrastructure upgrades.”
A copy of the Altus Group 2017 Canadian Property Tax Rate Benchmark Report can be downloaded here.