Business Advocacy Group Says No consultation With Impacted Businesses
BRITISH COLUMBIA – Merchants facing empty store shelves for the holiday season, from flood and pandemic supply chain disruptions, just got a Grinch gift from the provincial government’s BC Assessment Authority (BCA) who, without any warning, unilaterally removed their tax relief on air space, ignoring a previous 2014 Supreme Court settlement.
To compensate, the provincial government offered those nearly 200 impacted properties in Vancouver, Victoria and other lower mainland cities a one-year only temporary exemption on the School Tax businesses pay, (not to be confused with the separate and Additional School Tax (AST).
The caveat is that any tax reduction is “based on the property’s 2022 values” and civic “tax rates”, said BCA in an email sent late Friday, Nov. 26, 2021, past most media deadlines, typical of government’s “bad news” protocols.
The BCA email also noted government was “unable to engage in…consultation. Government is aware that the change in classification resulting from this ruling will lead to property tax increases for this group of properties… many of which are occupied by small businesses.”
Any tax relief is of course welcomed, particularly since Vancouver property taxpayers already overpay on School Tax, says Ryan Tung, Property Tax Principal of Ryan ULC, working on behalf of the Business Tax Alliance (BTA). The BTA is a new advocacy group representing over 10,000 commercial taxpayers, from Victoria, Vancouver and Surrey, focused on solving the enduring small business tax problem of well over a decade.
However, Tung said: “this could be a fairer solution if it’s a permanent exemption as we’ve already recommended. Some negotiation with us and impacted merchants before throwing out a legal decision would have been preferred.”
One of those impacted businesses is The Boardroom at 1749 W 4th Ave. in Vancouver. Owner Murray Fraser would see a 35 per cent increase in his property taxes, from $45,745 in 2021 to $61,634 in 2022, a $15,889 hike, without the one-year temporary school tax exemption.
“A 35 per cent increase in property taxes places a massive burden on my business,” says Fraser. “I have run my own business for over 30 years and the growing burden on local, independent business, whether it be payroll taxes or more property taxes, is totally unsustainable. Business operators such as myself have had to cut back on space, hire fewer staff and take other cost-cutting measures just to stay afloat. Surely it is time for government to stop gouging property taxes on properties such as this.”
Tung points out the one-year school tax exemption is pretty cold comfort in Vancouver, when the city continues its historically high taxation (see chart). Vancouver city council just passed its 2022 budget with a property tax hike of 6.35 per cent, along with the Metro Vancouver regional government tax increase of 3.5 per cent.
Council also approved the Vancouver Mayor Kennedy Stewart’s new, annual “climate levy”, based on value, hitting both residential and commercial property owners. (These increases do not include those “airspace taxes” levied on Highest Best-Use (HBU) merchants pay for undeveloped space above their retail stores.)
A recent Daily Hive article also confirms: “City staff have indicated to city council that an average property tax increase of 9% to 10% in 2023 and an annual average of 7% for the five-year period from 2022 to 2026 are needed.” Businesses in cities across Canada are grappling with similarly bloated tax burdens. The CEO of the Calgary Chamber of Commerce said: “this isn’t the time to be raising property taxes by this amount” after council approved a surprise tax hike of 3.87% following the city staff recommendation of less than one per cent.
“While we are pleased that the BC government elected to temporarily deal with this tax unfairness through excess school tax remission on properties (valued at Highest-Best Use), we have already proposed tax solutions to government policy staff and BC Premier John Horgan, notes Tung. “We still believe this can be resolved in a collaborative manner.”
The BTA has two Tax Solutions goals:
- A fair solution for small business taxation on properties valued as redevelopment
- Return of the commercial vote in municipal elections. Impacted businesses may sign on to this tax appeal and municipal vote campaign.
BTA solutions proposed:
- Properties taxed at “highest, best use” (HBU) receive a 50 per cent break on their school tax share of their taxes, given Vancouver school taxpayers already subsidize the rest of BC.
- HBU properties are placed in class 10 (new class) with a 25 per cent lower tax rate than class 6. (Any tax revenue shortfall would be covered by all taxpayers.)
- Split Class – place a residential tax rate on the vacant air space above shops, and no longer charge Speculation and Vacancy Tax (SVT) or AST on the residential assessment (class as you value).
- In all proposed solutions above, a property must have an active business license to qualify for a tax reduction. A resident and business owner would not get two votes in the same city.
Ryan ULC is an award-winning global tax services and software provider. They recently acquired the local BC commercial real estate appraisal firm Burgess, Cawley, Sullivan, advocates of local business tax relief for more than 40 years.
