The gap between residential and commercial property tax rates in Red Deer narrowed slightly last year, says a national business association.
The Canadian Federation of Independent Business issues an annual report that compares average residential and commercial property taxes in municipalities across Alberta. It refers to the ratio between the two rates as the “tax gap,” which the CFIB says is more unfair for businesses the bigger it becomes.
In its most recent property tax gap report, issued on Wednesday, the CFIB calculated Red Deer’s 2011 tax gap at 2.23 — which means the owner of commercial land would pay 2.23 times more taxes than the owner of residential property with the same assessed value. That resulted in the city being ranked 40th out of 88 Alberta municipalities with more than 5,000 people, with those above it having a larger, or less equitable, tax gap.
For 2010, Red Deer’s tax gap was 2.30 but the city was ranked 38th.
Ponoka County had the highest tax gap among the 88 municipalities listed for the second year in a row, at 6.22 (up from 6.01 for 2010). Mountain View County was eighth, at 4.45 (up from 4.08); the County of Stettler was 20th, at 3.05 (down from 3.04); Red Deer County was 25th, at 2.95 (up from 2.93); Clearwater County was 31st, at 2.60 (up from 2.54); Lacombe County was 45th, at 2.02 (up from 2.00); Sylvan Lake was 50th, at 1.86 (unchanged from 2010); Stettler was 74th, at 1.40 (down from 1.42); Olds was 76th, at 1.37 (up from 1.32); Lacombe was 77th, at 1.31 (up from 1.25); Blackfalds was 78th, at 1.31 (down from 1.33); Ponoka was 79th, at 1.30 (down from 1.32); and Innisfail was 80th, with the most favourable tax gap in Central Alberta at 1.24 (the same as for 2010).
The average property tax gap among all 88 municipalities was 2.42 for 2011, up from 2.37 the previous year. In 2003, the average tax gap was 1.62.
Richard Truscott, the CFIB’s Alberta director, said many municipal governments treat small businesses like a “cash cow.”
“It’s time the property tax system is made more fair and equitable for Alberta’s entrepreneurs by forging a stronger link between the amount of taxes paid and the municipal services actually received,” he said in a release.
But Joanne Parkin, revenue and assessment services manager for the City of Red Deer, pointed out last year that there are several reasons municipalities charge higher taxes on commercial property than on residential land. Businesses often attract customers from outside the area who then use local roads and other amenities, she said, and many people believe that businesses have greater success in communities where the infrastructure and other publicly-funded features are well-maintained. She also pointed out that property taxes are a tax-deductible expense for businesses.
In the case of Ponoka County, chief administrative officer Charlie Cutforth pointed out last year that the 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.
Additionally, said Cutforth, Ponoka County has one of the lowest residential tax rates in the province, which increases the size of its tax gap.