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Death and taxes: B.C. told to fix how industry's being milked to the bone

David Parkins for The Globe and Mail/david parkins The Globe and Mail

For two years, the B.C. government has made sympathetic noises about the rate of taxation that municipalities levy on industry. The expressions of concern have flowed in response to a challenge, led mostly by the forest sector, to the notion that local government can milk heavy industry in order to keep tax rates low for residential ratepayers.

The province has launched reviews, appointed steering committees and advisory committees that in turn named advisers to develop recommendations, and last month established a panel of tax experts ...

Anything but make a decision.

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Now, the Supreme Court of Canada has dumped the conflict back on the front steps of the B.C. legislature.

Two years ago, former premier Gordon Campbell promised to intervene in the tax dispute. He then handed the file off to Bill Bennett. Who in turn tossed it to Ben Stewart. Premier Christy Clark came along and promised action. Ida Chong inherited it next, promising last August that she would "extensively review" the matter.

But Ms. Chong's Major Industrial Property Taxation Review is dead in the water. It wasn't formally disbanded, it simply has faded away. A new panel of tax experts is on it, under the direction of cabinet's man of action, Finance Minister Kevin Falcon, who is vowing to put an end to the dithering.

The court challenge was brought by the company that has led this tax revolt, Catalyst Paper Corp., against the District of North Cowichan on Vancouver Island.

The Vancouver Island community charges the company's Crofton mill a property tax rate 20 times higher than the residential rate.

In a Jan. 20 decision, the Supreme Court described those tax levels on the mill as "harsh," but concluded that municipalities have "a broad and virtually unfettered legislative discretion to establish property tax rates in respect of each of the property classes in the municipality, unless limited by regulation."

The court ruled against the company, but the decision brought clarity, Catalyst vice-president Lyn Brown said. "If there was any doubt about where the problem needs to be solved, that is gone." The province gave local government the tax authority, and only the province can rein it in.

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This week, Catalyst's troubles deepened as it filed for creditor protection after workers at the Crofton mill rejected a restructuring plan. It leaves Ms. Brown nostalgic about the days when her company was still listed as penny stock.

"The province needs to provide an answer to those that would anchor big capital investments to the ground in this province," she said. "Is there some hope governments and policy makers will be attentive to the conditions that industry is dealing with?"

After a decade of talking about it, North Cowichan Mayor Jon Lefebure says the district council is now preparing to address its over-reliance on Catalyst to pay the bills.

"I don't believe the province needs to do something from on high," he said in an interview this week. He acknowledged the mill is in "a very precarious position," and council is planning to ask homeowners to pick up a greater share of the cost of their municipal services this year. It is a tough political pitch, but he stressed this would be one-time relief.

Mr. Falcon's expert panel on business taxes will consider a broader, longer-term solution.

"It's the appropriate time, given the economic uncertainty, to ensure we are sending the right signal to investors," Mr. Falcon said. "We will make sure we do everything we can to ensure B.C. is a welcoming place for investment."

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Just not yet. His tax panel reports at the end of the summer. And if its proposed solution requires cash from the province, then industry will have to wait until next year's budget for an answer.

"It's been a frustration," Ms. Brown said, "that the speed the future is reaching us is a lot faster than the speed at which we are adapting."


One model for a property tax remedy

The problem:

In 2003, the B.C. government faced a tax revolt from industry, this one from port operators who complained that their host municipalities were taxing them out of competitiveness.

The solution:

A property tax relief initiative. The province capped property tax rates for tenants of 15 port terminals across the lower mainland. It compensated the local governments for lost revenues.

Did it work?

Apparently. The province has seen rapid expansion in its ports and, in 2007, extended the cap for another 10 years. It also increased the compensation to local governments and widened the scope to include ports up the coast.

Could it work again?

This model gives both local authorities and business what they want, but the province needs to make a long-term financial commitment. That won't happen in the budget that Finance Minister Kevin Falcon will introduce on Feb. 20, which is more or less locked down now. So relief of this kind might have to wait until 2013.

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