BC – The Canadian Federation of Independent Business (CFIB) today released a new report on the property tax system in BC, focusing on the provincially-controlled school tax. The report, “BC’s Provincial School Tax: Province Failing Small Business”, provides a decade-long review of school tax rates in 161 municipalities across BC, with a particular focus on the 20 largest cities.
The school property tax levy is charged by the province on all properties. The tax rate is the same across the province for all businesses. For residents, the rate is variable based on the total number of residences and assessed property values. The report illustrates a disproportionate amount of the tax bill is placed on BC business, particularly in municipalities with high real estate values.
The report analyzes the disparity between what residential and business property owners pay in school property tax (based on the same assessed value of property) for 161 municipalities. The ratio between the commercial and residential school tax rates is known as the “school tax gap” and is an indicator of tax fairness (not tax levels). For instance, a tax gap of 3.0 means a commercial property owner pays three times the school taxes of a residential property owner.
The findings show entrepreneurs in the 20 largest cities (population over 50,000) across BC pay over three times more than residents (3.19 times; see table below for details). Province wide, the average is 2.47. Some of the worst tax gaps are in the most populous cities, like Vancouver (4.40). For illustration what this means in dollar terms, a resident of Vancouver paid $2,020 in school property taxes in 2015, while a business paid $8,891 (based on Vancouver’s 2015 average property value).
“CFIB has long tracked the inequity in municipal property taxes. However, this report shows the problem is just as bad in the provincial school tax system,” notes Aaron Aerts, BC Economist. “This report provides clear evidence businesses are on the hook for an unreasonable amount of the school tax bill. The provincial government needs to take a close look at how it sets tax rates, as the current system places an unfair burden on many small businesses.”
The analysis also looks at historical trends of the school tax gap for BC municipalities, and finds it has fluctuated considerably over the past 10 years. The largest 20 municipalities’ tax gap has fallen in recent years, down from a peak of 3.73 in 2007. However, it’s only slightly below where it was in 2005 (3.39). The school tax gap for all BC municipalities was 2.47 in 2015, down from a high of 2.90 in 2007 and 2.60 in 2005.
“It is promising to see some progress towards a fairer school property tax system for small businesses. That being said, significant work remains, as some businesses continue to pay over three or four times more than residents on the same property value,” added Aerts.
In a recent CFIB survey, 61 per cent of business owners ranked property taxes as the most harmful tax for their operations. As this is such a negative form of taxation, British Columbia needs to emulate provinces like Alberta and Saskatchewan, where the school tax gap is much more equitable (roughly 1.5 and 1.65 respectively).
