Municipal tax gap under fire
Many Alberta municipalities are treating their business sectors like a “cash cow,” says an advocacy group that represents small and medium-sized enterprises.
The Canadian Federation of Independent Business says cities, towns and counties in the province are taxing commercial properties at a much higher rate than residential properties, and the disparity is growing. In 2003, it said, commercial landowners in municipalities with 5,000 or more people paid on average 1.62 times the taxes that residential owners do on property with the same assessed value. Between then and last year, this “tax gap” increased by 53 per cent, to 2.48.
The CFIB calculates the tax gap for Alberta municipalities every year, with a focus on those with 5,000 or more people. It released its 2012 results on Wednesday.
These showed that Red Deer had a tax gap of 2.05 last year, which was the 42nd greatest difference among 86 municipalities. The figure for the city has been declining steadily since 2008, when the local tax gap stood at 2.80.
“It’s been a concerted effort,” said Red Deer city manager Craig Curtis of the four-year decline. “Every year we’ve looked at this very carefully.”
Curtis said it’s important that the city ensure its business tax structure is fair, relative to other municipalities.
“We generally compare ourselves with Medicine Hat, Lethbridge, Edmonton and Calgary, and they’re all significantly higher,” he pointed out.
“When we were at 2.80, we were one of the higher ones.”
Curtis pointed out that in 2011 Red Deer was ranked by the CFIB as one of Canada’s top entrepreneurial cities, with municipal taxes one of the criteria considered.
There are reasons why businesses face higher property taxes than residential landowners, he said. Commercial property generates income, and businesses are also able to deduct property taxes as a business expense when calculating their income taxes.
Among Alberta municipalities with 5,000 or more people, Ponoka County had the greatest tax gap at 6.40, with Mountain View County 11th (4.10), County of Stettler 21st (3.06), Red Deer County 25th (2.96), Clearwater County 29th (2.70), Lacombe County 44th (2.02), Sylvan Lake 47th (1.86), Olds 74th (1.37), Blackfalds 76th (1.36), Stettler 75th (1.36), Ponoka 77th (1.31), Lacombe 79th (1.28), Innisfail 81st (1.24) and Rocky Mountain House was tied at 84th with commercial and residential rates that were equal.
A call by the Advocate to Ponoka County resulted in a subsequent message from Charlie Cutforth, the county’s chief administrative officer. But his comments could not be obtained before press time.
However, Cutforth has previously explained that his rural municipality is required by law to link its non-residential property tax rate to the linear rate it charges the oil and gas industry — a sector that places a great deal of pressure on local infrastructure that must be paid for. He has also pointed out that Ponoka County has one of the lowest residential tax rates in the province, which also increases the size of its tax gap.
The average tax gap for the 86 municipalities in 2012 was 2.48, up from 2.42 the previous year.
“Thankfully, there was some improvement in the tax gaps for many cities in 2012,” said Richard Truscott, the CFIB’s Alberta director. “In most cases, however, it was likely the result of changes in the assessment base rather than a conscious tax policy decision by the local government.
“We plan to work with new city councils from across the province to create firm plans to close the property tax gap.”