According to Altus Group’s recently released 2018 Canadian Property Tax Rate Benchmark Report, which surveyed 11 major Canadian cities, 7 out of 11 municipalities across Canada have commercial tax rates which are at least 2.5 times greater than residential tax rates.
Property taxes are, of course, the lifeline for Canadian municipalities, since it’s the main source of revenue used to fund public transportation, road maintenance, schools, parks, and so many other services. However, commercial tax rates can play a large role in whether a city would attract businesses or not.
According to Terry Bishop, Altus Group’s president of property tax for Canada, in a perfect tax system, “the ideal ratio would be one-to-one,” with commercial and residential tax rates the same. “Lower tax ratios [in one area] are an indicator that cities are balancing the tax load on commercial ratepayers,” and this can prompt businesses to relocate.
Commercial tax rates can play a large role in whether a city would attract businesses or not.
The city that led the list for the largest commercial-to-residential tax ratio is Vancouver, at 4.40. The silver lining for this west coast city, however, is that it offers the lowest commercial and residential tax rates of all 11 cities surveyed. This was mostly due to the city having such highly appreciated property values compared to other cities in the country.
Calgary had the largest commercial tax hike, with a jump of 9.48%, increasing its commercial-to-residential property tax ratio to 3.06. “The tax rate on commercial properties is going up a lot because the commercial assessment base has been dropping with the exodus of office users, particularly in the downtown core,” said Terry Bishop.
Quebec city was right on the heels of Calgary’s commercial tax rate leap, at 7.38%. This places Quebec City’s commercial property taxes per $1,000 of assessment at $36.09, slightly lower than Montreal’s $37.76 per $1,000, which is the highest of all cities surveyed in the report. On the other hand, Quebec City saw the largest residential property tax rate decrease at 7.47%, placing its commercial-to-residential tax rate ratio at 3.57.
A major contributor to Quebec City’s high commercial tax rates is the province’s lack of specific taxes on services such as water, which many Canadian cities charge in order to keep property taxes more manageable.
Of all the cities surveyed, Winnipeg and Saskatoon were the only two cities on the report with commercial-to-residential tax ratios below 2.0. “They don’t have the big commercial assessment bases that Toronto, Montreal, and Vancouver do, so there’s more of a balance between the reliance on the commercial base and the residential base,” stated Bishop.