Kevin Laliberte
Editor, Smoky River Express

If you’re a property owner, you probably just finished paying your property taxes for 2008. How did it make you feel? Does your municipal government provide good value for your tax dollars? Chances are if you’re a business owner, you’ll likely say no. Here’s why, according to Janine Halbesma, senior policy analyst with the Canadian Federation of Independent Business. She says that according to a new study on property taxes from the federation, most municipalities in Alberta are not treating businesses fairly. The study found that of 351 Alberta municipalities, 231 charged higher tax rates on commercial properties compared to residential properties. In other words, if you own a house and business property of equal value, the municipal taxes on your business property are higher than on your home. Some people believe that businesses should pay higher property taxes than residents. However, she says there are a few misconceptions.
Myth 1 – businesses consume more public services
Businesses, especially small ones, actually use fewer services than homeowners. For example, a recent study in Vancouver found that for every dollar of services consumed, homeowners paid $0.56 in property tax while businesses paid $2.42. In addition, most businesses are forced to pay for services provided free to residents, such as garbage collection. When taxes paid are roughly equal to the cost of services received, then people generally feel that they are receiving fair value for their money. Unfortunately, this is often not the case for business owners.
Myth 2 – businesses have a greater capacity to pay
This is a lasting, but inaccurate justification for imposing higher property taxes on business. In reality, the business sector is not so easily characterized. Most businesses in Alberta are very small. In fact, 95 per cent of Alberta firms have less than 50 employees. Many small firms operate on very tight profit margins, especially with escalating rent, labour and energy costs.
Myth 3 – businesses can deduct property taxes from corporate taxes
This argument presumes that all businesses are able to benefit from tax deductions. Those that are struggling or just breaking even or losing money don’t receive a deductibility benefit. In addition, even a deductibility benefit doesn’t account for the significant difference between residential and business properties tax rates in some communities. Okay, so what exactly does this all mean? Municipal services are being provided to residents for much less than their actual cost. As a result, demand for these services is higher than it would be if residents were responsible for paying the full price. The solution is not simply to raise residential property taxes. Instead, municipalities should trim their spending and narrow this unfair gap between what business properties and residents must pay. Otherwise it’s the local restaurant, hair salon or auto mechanic that ends up paying more than their fair share. In the end, sustainable communities need a fair tax system. Halbesa says that when a tax system is too unfair to business owners, the reality is they may start looking to relocate to another municipality which is more competitive. And when that happens, it’s the residents who end up picking up the shortfall. As Albertans, we need to work towards a much fairer tax system which enables local businesses to remain competitive while giving back to our communities. When that happens we all win! Curious about the results from your municipality? Check out the CFIB study at http://www.cfib.ca/research/reports/rr3064.pdf.

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