Canadian cities shifted more of the property tax burden to home owners from business owners in six of 10 major centres in 2017, but Vancouver bucked the trend by moving the ratio in favour of residential owners.
A new study by real estate research organization Altus Group reviewed tax rates in major cities across Canada, concluding Vancouver's commercial tax rate of $12.44 per $1,000 of assessed property value was the highest in Canada in 2017 when compared with the city's tax rate for residential homes at $2.55 per $1,000 of value.
The ratio of Vancouver's commercial tax rate to residential rate climbed to 4.87 in 2017 from 4.38 in 2016, the highest differential between business and residential tax rates of a major city in Canada, Altus Group said. The difference means taxes on a business property with an assessed value of $1-million would total $12,440, while taxes on a residential property worth $1-million would total $2,550.
Terry Bishop, president of the property tax group at Altus, said keeping business property tax rates at a moderate level is important to help attract investment to a community and spurs more commercial growth, which leads to a stable tax base for the city.
Vancouver has seen property values soar in recent years, providing an opportunity to recalibrate the weight of the tax burden between businesses and home owners in a strong economic environment, Mr. Bishop said, but it has not opted for that route.
"The tax ratio is a discretionary decision that city councils make every year when they set their tax rate, and if you look at the trend over the years you can see that Vancouver, which has always had the highest ratio, is continuing to go up," Mr. Bishop said.
"With the rise in residential real estate prices in Vancouver, you'd think that would be an opportunity to back off on the tax ratio and help cool the residential real estate market a bit, but they haven't done that."
Regina lowered its tax ratio between commercial and residential properties the most in 2017, the report shows, with businesses paying a tax rate 1.75 times higher than the residential rate, a drop of almost 22 per cent from a ratio of 2.23 in 2016. Saskatoon had the lowest ratio in Canada at 1.72 in 2017.
Both cities do reassessments of property values every four years, and 2017 was the first year in a new reassessment cycle, Mr. Bishop said. With higher overall assessed values, city governments rebalanced tax rates with a continuing pro-business stance, he said.
"They took advantage of that opportunity and chose to reduce the ratio rather than keep it the same or increase it," he said. "If they reduce the tax ratio, it generally means they are consciously trying to narrow a gap between commercial and residential tax rates."
The comparison of tax rates per $1,000 of property value does not necessarily reflect the average amount of taxes paid by owners in each city because property values vary widely across the country.
Vancouver's commercial tax rate of $12.44 per $1,000 of property value in 2017 appears low compared with Halifax's commercial rate of $33.18 per $1,000 of value, for example, but Vancouver's rate is applied to properties worth more on average.
Cities set tax rates each year by determining their budget needs for the coming year and then calculating a tax rate based on the assessed value of properties in the community. Cities typically cut the tax rate to keep revenues stable when property values soar, and may even cut the rate when they have voted to raise taxes if property values rise by more than the rate of the budget increase.
Toronto City Council, for example, voted to raise residential taxes by 2 per cent in 2017, but still had a lower tax rate per $1,000 of assessed value as property values climbed. Commercial property tax rates were cut to $25.20 per $1,000 of assessed value in Toronto in 2017, a decline of 4.53 per cent, while residential rates were cut by 3.83 per cent to $6.62.
The result was that Toronto's ratio of business tax rates compared with residential rates fell to 3.81 in 2017 from 3.84 in 2016. Toronto had a policy goal of bringing the ratio down to 2.5 by 2020, but this year extended the deadline to 2023.
Because of soaring property values, Vancouver's commercial tax rate was cut by 10.2 per cent in 2017 to $12.44 per $1,000 of assessed property value from $13.86 in 2016. The residential tax rate was cut by more, however, falling 19 per cent to $2.55 in 2017 from $3.17 in 2016.
Calgary raised its commercial and residential tax rates in 2017 following a slump in assessed property values, but raised commercial tax rates by more. The ratio between the two rates climbed to 2.73 in 2017 from 2.58 last year.