TABIA - Toronto Association of Business Improvement Areas

REPORT OF THE TAX COMMITTEE FOR ANNUAL GENERAL MEETING APRIL 29, 2008  

WHAT ARE THEY DOING TO US NOW? 

There have not been many new developments since our report in 2007, but a number of developments previously reported are kicking in this year.  Both the Province and the City are implementing programs to solve the problems created for small business by Current Value Assessment.  The renowned economist, Milton Friedman, once remarked that Government’s solution to a problem is usually as bad as the problem.  You be the judge.  

HOW DO YOU SPELL R-E-L-I-E-F? 

The City’s two-pronged relief program continues.  The first prong is adjustment of the ratio of tax rates between commercial and residential property.  The goal is a ratio of 2.5:1, which, if achieved, would be a huge improvement over the recent ratios of four or five to one.  Don’t expect to see any reduction on your tax bill from this one.  The target ratio is to be achieved by 2020 (theoretically 2015 for “small business”, a term which has never been defined) by raising taxes, not lowering them.  If you increase everyone’s taxes, but increase the residential rate more quickly than the commercial rate, sooner or later, the goal is reached.  Clearly the City does not anticipate that its appetite for revenue will be satiated anytime soon. 

The second prong starts this year, specifically the graduated tax.  If you think that the City can’t distinguish between income tax and property tax, you got that right.  The first one million dollars of assessed value on commercial property will be taxed at a lower rate, while that portion of the assessed value over one million will be taxed at the regular rate.  Initially the first tier was to have been $600,000.00.  It was TABIA’s urging which prompted the City to set it at a million. 

On some properties you might see some real benefit from the graduated tax.  The rate of tax is supposed to be coming down by a factor of 1.29.  That would make a significant difference on a million dollars, but what savings you will see depends on the value of the building and how its tax burden is spread across its occupants.  The enormous disparities in the benefit from the reduced rate are well illustrated in the example appended to this report which, by the way, is an example which we provided to the Mayor when the idea of a graduated tax was first mooted.  A Shoppers Drug Mart in a stand-alone store will reap the entire benefit, while a small business tenant in a multimillion dollar plaza will see almost none.  The entire CVA (Current Value Assessment) system, from assessment to the applicable rate, is more like a lottery than a tax.   

MORE R-E-L-I-E-F? 

Also starting this year is the Province’s program to provide a uniform rate (1.6%) for business education tax across the province, by the year 2014.  The Government introduced this program in its 2007 Budget with great fanfare, announcing that it would save commercial property owners hundreds of millions of dollars in tax.  It picked up a lot of excellent media attention with that provision.  We doubt that you will ever see any relief from it.  Painfully slow implementation and fast rising assessments will thwart any reductions for Torontonians.