UBCM Appears Before Tax Competitiveness Commission

UBCM delivered a presentation to the Province of BC’s Commission on Tax Competitiveness last week.  Announced in Budget 2016, the commission was appointed by the Minister of Finance in July. The Commission will provide recommendations on how to modernize British Columbia’s PST and other business taxes to enhance competitiveness and stimulate economic growth.

As part of its work, the Commission undertook targeted public and stakeholder consultations. Other groups appearing before the Commission identified municipal business taxes as an issue.

In its presentation to the Commission, UBCM referenced work undertaken for the provincially appointed Expert Tax Panel back in 2012. The presentation provided the following context-setting statistics:

  • When taxpayers look at their property tax bill, few realize that municipalities receive only a portion of the property tax collected. Using 2016 data, the total property tax levy totaled $7.3 billion. Of this total, however, just $4.1 billion – or 56% - was for “municipal” taxation. Regional District, transit and some other taxing jurisdictions represent 10%. The remaining 34% of the 2016 property tax supported provincial services.
  • Of the $4.1 billion in municipal property taxes referenced above, 61% of this share is levied to residential taxpayers, 37% to businesses and 2% to other properties. While the overall tax burden has increased, the percentage share of taxes levied on businesses has decreased by 5% since 2000.
  • Municipal tax competitiveness must be considered in the context of all other provincial and federal taxes paid by businesses. Based on 2016 data, UBCM estimated the municipal tax burden represents approximately 14% of the total business tax burden in B.C. This estimate does not include taxes levied by the Federal Government.

Back in 2012 UBCM told the Expert Panel that local governments supported the province’s aim of creating and sustaining a competitive tax environment. UBCM reiterated to the Competitiveness Panel that this is still the case today.

UBCM also noted that the majority of recommendations of the 2012 Expert Tax Panel have not been acted upon. The 2012 final report included recommendations that the Province work with UBCM and local governments on collaborative processes related to business tax benchmarking, best practices, and cost containment. In addition, a final recommendation spoke of the need to improve the integration of economic development strategies, and that arrangements should be made for local governments to share in the revenue gains associated with sustained, improvement in economic performance.

On balance, UBCM thought the findings of the 2012 Expert Panel were fair and deserving of further work and attention and we remain of that view.

UBCM reiterated three concepts for the Commission to consider. They were as follows:

Perspective:  Remember that municipal property tax represents a small proportion of the overall tax load on business.

Build on the existing framework:  The framework is sound, and municipalities are able to use existing tools to affect change. Promoting these tools – things like highlighting best practices with respect to local tax policy decision-making, and use of tax agreements and revitalization exemptions - is likely to improve the pace of change.

Encourage inter-governmental dialogue and creative solutions: The local government system is diverse and complex. We need to work at this together and have local governments sitting down with the province and the federal government to make a concerted effort to look at the balance of responsibilities and authorities, and the range of tax and revenue. And we need to talk about inter-governmental transfers and take a good look at the cost effectiveness of the full regulatory system.

UBCM also cautioned against overly simplistic solutions that have been proposed by some organizations, such as a mandated ratio between residential and business taxes. A ratio of this nature in the current environment of rapidly escalating residential assessment and relatively flat business assessment will end up with unintended consequences that ultimately would not serve the business community well.

In conclusion UBCM would note that the Commission is comprised of individuals with knowledge and experience in the area of tax policy and we were appreciative of the invitation to appear as a delegation. We will keep our membership appraised of their final recommendations when the report is released later this fall.

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