Government must amend property tax policies that leave small businesses shouldering a disproportionate portion of the tax base, according to a group of BC business associations.
The Business Tax Alliance, which includes business associations representing Downtown Victoria and 14 Lower Mainland jurisdictions, formed late last year.
It claims the province’s practice of assessing property values on redevelopment potential and the value of surrounding properties has created a status quo well beyond the means of small business owners in B.C.’s largest municipalities, said Alliance spokesperson Paul Sullivan.
In the Capital Regional District, commercial property tax is three times higher on average than that of industry or residential said Bev Highton, owner of Victoria’s NAI Commercial real estate brokerage.
Highton cited a heritage building in Victoria’s downtown core valued by BC Assessment at $2.6 million in 2019. Its value climbed by 31 per cent to $3.4 million the following year, and another 27 per cent to $4.1 million in 2021.
The 2020 sale of a nearby property for a new 15-storey building was a factor in the massive hike.
This BC Assessment’s practice affects more than just the property owner said Jeff Bray, executive director of the Downtown Victoria Business Association.
“What happens is the owner has to pass that cost on to the tenant,” he said. “That can really impact a business, especially during the pandemic when revenues are down to begin with.”
He mentioned a downtown Victoria parking lot which saw its assessment rise 100 per cent in one year. “That forces you to charge 20 bucks an hour for parking, or redevelop, whether you want to or not,” Bray said.
One of two proposed Tax Alliance solutions employs a strategy used by Sullivan in court during his time as a business and commercial property owner in Vancouver. By arguing to split his property’s taxation class as commercial for the building itself and residential for the undeveloped airspace above it, he was able to reduce his tax bill by 75 per cent, he said.
“It only works in certain zones, but it provided the blueprint for that approach. We won it in court. Surely we can win it in policy,” he said.
The other solution may appear more radical, but Sullivan, Highton and Bray say it is more feasible: giving business licensees a single election vote in municipalities they’re registered.
Highton, a Victoria real estate agent of 54 years, said commercial tenants know “fully well” the effect of property tax on their expenses including rent. As such, small business owners are very interested in the financial aspects of city governance, Highton said.
In Vancouver, commercial buildings account for 45 per cent of property taxes paid, despite making up only seven per cent of the city’s properties. Victoria’s commercial properties accounted for the same percentage of the city’s property tax collection; $67 million of $147 million collected.
“Huge contributors should at least have a vote,” Highton said.
The move would add about 523,000 municipal voters to the three million across B.C., Sullivan noted. Several municipalities already allow qualifying non-resident property owners to cast ballots.
Although it could take as long as two years, Bray said amending the BC Assessment Act to allow for the first solution is “very doable.”
“If a city needs to collect $100, it’s going to collect $100 – the issue is who makes up that $100?” he asked. “All those small mom and pops. A lot of them just can’t afford it.”
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