Cap the Tax Gap
The newly released BC Property Tax Gap Report takes a ten-year look at the disparities between residential and commercial property tax rates across the province, also known as the “tax gap”. The gap is a measure of property tax fairness for small business. A gap of 2 means commercial property pays twice as much as residential property on the same assessed value of property.
In BC, the overall tax gap has started to narrow in recent years. After rising from 2.54 in 2004 to 2.90 in 2009, the gap closed to 2.61 in 2014.
While pleased to see the average gap is declining, we are concerned the biggest cities remain the biggest tax gap offenders. Coquitlam continues to have the dubious distinction as the city with the largest tax gap at 4.31, followed by Vancouver at 4.27, then Burnaby at 3.99. This means business property owners in those cities pay around four times the tax than residents on the same assessed property value.
To ease the municipal property tax burden on small business, municipal governments should:
- Cap the property tax gap between businesses and residents at a maximum of 2 to 1.
- Provide earlier property tax notices for commercial taxpayers.
- Allow commercial taxpayers to remit taxes in monthly or quarterly installments.
- Extend the homeowners’ grant to business owners occupying live/work spaces.
- Close the gap without raising the business tax rate.
- Move away from utilizing a flat tax rate for residential properties, as it can create large distortions in the tax gap when there are spikes in real estate prices.