32 responses so far ↓

• 1 Neil Monckton // Mar 5, 2012 at 11:16 am

  Thanks for shining a light on the FTC’s antics.

  This Board of Trade group has had far too much influence on the city’s fiscal policy under the NPA and Vision since 2008.

  In particular, the FTC inspired five-year tax shift trial – which will have downloaded $75 million from corporations to residents by the end of this year – has been particularly harmful. This misguided corporate welfare policy has played havoc with the budget, as the city has had to reduce its annual operating revenue total to support this shift.

  The result? The city made record cuts to programs and services in the past three budgets in large part to pay for this policy (by setting corporate tax levels lower than residential tax levels). And the shift will continue to hurt revenues for the 2012/2013 budget period.

  The good news is the tax shift is finally coming to an end. Last December, Mayor Robertson said he would not support extending the trial so this five-year failed experiment will end by 2013.

  That’s real tax fairness.

  (For more on municipal finance reform, SFU public policy professor Doug McArthur’s thoughtful piece on real civic tax fairness from 2009 still makes for good reading — see http://thinkcity.ca/node/181.)

• 2 spartikus // Mar 5, 2012 at 11:16 am

  Old posts at my blog:

  What’s the business tax shift supposed to do, anyways Pt 1

  What’s the business tax shift supposed to do, anyways Pt 2

• 3 Julia // Mar 5, 2012 at 11:40 am

  Clr. Louie may need to give his head a shake. Changing global real estate practices as a fix for a locally generated problem is not going to happen any time soon.

  Niel #1 The tax shift has made zero impact to the revenue stream to the city. Commercial Tax levels are over 5 times that of the same value residential property.

  you call that fair?

• 4 MB // Mar 5, 2012 at 12:34 pm

  @ Julia #2, from Doug McArthur’s piece linked in Niel’s post in #1:

  “There is also an important question about who really gains. Since relative tax relief increases the market value of business properties over time, the cost of acquiring properties goes up and so too does the cost of doing business, eroding the benefit of the tax relief. And this erosion falls immediately and most heavily upon new, usually young start-ups who are purchasing or renting property. Indeed, the supposedly preferred tax treatment puts the new and younger business operators at a competitive disadvantage, which is the opposite of what most advocates for the tax shift would want to see.

  “It is time for a principled discussion about the reasons for the tax shifts that some cities are pursuing, and for greater transparency about the consequences of these shifts. Otherwise tax changes go to those who push the hardest and who are most successful at playing the lobby game.

  “And if business needs help, it might be better to look at things that will be more effective, such as support for young start ups, as well as high growth and high value sectors, knowledge dependent hubs and small, independent business. Or perhaps make the case for a lower corporate tax rate for small business. But these ideas appear to make a lot more sense than blanket property tax shifts from business to residential taxpayers. “

• 5 Julia // Mar 5, 2012 at 12:42 pm

  property taxes are NOT income taxes.

  After supplying the Vancouver Economic Commission 2.6 million in tax dollars I find it interesting that they are silent on this topic.

• 6 spartikus // Mar 5, 2012 at 12:48 pm

  property taxes are NOT income taxes.

  That’s right. You can write-off your business property taxes.

• 7 Julia // Mar 5, 2012 at 1:07 pm

  true, but so can the apartment building owner.

  So for the sake of argument, lets make commercial property tax double that of residential to offset the tax write off. We are still way out of whack!

• 8 Call Me Cynic.er...Skeptical // Mar 5, 2012 at 1:56 pm

  I note the following.

  Co-chair of the FTC is Leonard Schein, a well know Vision supporter. How awkward. I think.

  This from Frances: “In the meantime, a rocky road ahead for the coalition members as they negotiate with the city, especially when you recognize that what Mike Magee says is often in synch with what Mayor Gregor Robertson is thinking on an issue. So if Magee is expressing strong disappointment, you can safely bet the mayor is not too happy about the coalition’s campaign either.”

  Mr. Magee is unelected. If we can “safely bet” the Mayor is “disappointed”, why doesn’t Gregor put on his big boy pants and come out and say so?

  What really threw me for a loop in watching the live stream of the council meeting last week, was watching the direct attack on FTC., who are comprised of taxpayers, after all.

  Both Raymond Louie and Andrea Reimer sounded like they have attended the Vic Toews School of Political Attack: by god, if you’re not with us, your’e against us! Everyone into the bunker!

  I especially invite Ms. Reimer, always eager to prove herself as the smartest in the room, to choose a commercial business to run in this town. She can ask the Mayor about tax consequences in this and other jurisdictions on a retail business. Get back to us on that, OK< Andrea?

  Then, after some time pondering, I realized that this was Vancouver Council theatre at its best/worst. Something is coming down the line .

  Who would gain from this type of attack? Many of Vision's voters this last time were students happy to get some free coupons, for participating and who still live in dorms, at their parents homes, etc. Home ownership and business isn't really on their radar, yet. They are more concerned with the big issues: like getting a drink at the Rio.

  However, perhaps it is some kind of scheme to ease the tax burden on those young Vision supporter shopkeeper types (those $3 donuts need a safe place to reside, after all). Something's up.

  @NeilMonkton may have provided the first clue. I am all for the young getting a good start, but not too happy if it means that the more established, proven businesses in this town keep carrying the tax can.

  In case you think I am advocating for more download on home owners: I also feel bad for average property owners who have seen their taxes rise as land values have risen. I also realize that we haven't been the highest taxed juridiction in the country, either. My remedy: break out all those financial accounts at City Hall, so that taxpayers can see where every penny of the money they fork over goes to. Which capital project, which services. Then have that dicussion before the next election a to where money goes. No pet projects for politicians, please, that support Vision members, for instance.

  Maybe the Mayor and his council might consider that if they drive all small business out of town they will be in even greater tax straights? Especially as neighbourhoods aren't exactly welcoming the oversubcribed , one bedroom towers that are supposed to grow that residential tax base. for them.

  Mr. Louie further states that BIA's help members work out a fairer system. (I thought that was what the FTC was for??). While the City's sets the tax rate?

  Be careful what you wish for, Raymond.

• 9 Agustin // Mar 5, 2012 at 2:00 pm

  Vancouver Fair Tax Coalition

  you call that fair?

  The trouble with talking about fairness is that it’s almost impossible to convince the other guy he’s unfairly gaining while you’re unfairly losing. Fairness is in the eye of the beholder.

  And let’s not confuse fairness with equality.

  I want to hear arguments about what will result in a better place to live, work, and play. (“Better” is also partly subjective, but less so: we can measure a population’s health, happiness, etc.)

  Will higher or lower property taxes on businesses make Vancouver a better or worse place? In what way? Are there other, better ways for the city to get revenues?

• 10 Christopher Brayshaw // Mar 5, 2012 at 2:27 pm

  I own three small businesses, employ eight Vancouver residents, and have some comments.

  First off: I chose entrepreneurship as a career (actually a second or third career, but close enough) and don’t require handholding, business welfare, or special pleading. I am as often embarrassed by the actions of the Fair Tax Coalition as supportive of them.

  That said:

  “Louie said to me last week that business associations need to start helping their members possibly work out a fairer system.”

  Raymond Louie needs to give his head a shake. Then, when he’s done, he needs to explain to small business owners all over the city how his ridiculous assertion is anything other than a slap across the face.

  Newsflash for Councillor Louie (and for Neil Monckton): any commercial landlord with property in a halfway desirable location charges their tenant triple net rent. That way, the landlord doesn’t have to try to guesstimate property tax increases over the three- to five- year term of a commercial tenant’s lease. In practice, this means the tenant receives an annual bill from the landlord that could, in many cases, be the surprise equivalent of an extra month’s rent.

  Spartrikus observes that you can “write off” property tax. That’s technically true, but it’s also true that the extra payment has to be made to the landlord in cash, typically within a week or two of receiving the bill: cash which is then not available to pay suppliers, staff, CRA, etc.

  “Well, you can plan for it.” True, but you never know quite how much, which is the same quandry commercial landlords find themselves in, which is why they are more than happy to permanently pass the problem along to their tenant(s).

  How does a smaller retailer cope with the problem? NOT plan for it (like the new owner of a small business near mine who called me up nearly hysterical last year having received a ‘surprise’ $10,000+ bill from the landlord) and go out of business, or plan for the worst case in advance, thereby taking money off the table and passing up spur-of-the-moment opportunities to acquire additional inventory, hire staff, etc.

  The current property tax/business tax/triple net situation isn’t working for small businesses throughout Vancouver. If Raymond Louie wants to help solve the problem, he should park his let-them-eat-cake attitude and play a more constructive role in determining a more equitable solution, instead of simply wishing and hoping that someone else might fix the problem for him and his constituents.

• 11 Neil Monckton // Mar 5, 2012 at 2:41 pm

  Hi Christopher,

  Think City would agree that something needs to be done to assist small business.

  Why not a separate property tax class so that mom-and-pop businesses are not getting lumped in with shopping centres, large office buildings, parking lots, etc? Toronto has this, so why not Vancouver?

  Moreover, in a 2006 report titled, “Our Cities, Our Future”, the mayors of Canada’s largest cities make the case that Canadian cities are competing with cities around the globe that are able to draw upon a much wider and more diverse range of revenue sources to finance the infrastructure and public services required to support a twenty-first century economy.

  For more on what municipalities can do to address the over-reliance on property tax and their related user fees see our report from 2010 here http://www.thinkcity.ca/localprosperity.

• 12 Julia // Mar 5, 2012 at 3:00 pm

  Neil, shopping centre and large office buildings are often full of small businesses. This explains it very well-

  http://fairtaxcoalition.com/property-tax-basics/the-truth-about-big-vs-small/

• 13 Julia // Mar 5, 2012 at 3:03 pm

  Neil, shopping centre and large office buildings are often full of small businesses.

  From the Fair Tax Coalition website;

  According to BC Stats:

  Small Business is defined as those businesses with fewer than 50 employees plus businesses operated by self-employed individuals without paid help.

  98% of all businesses in BC are considered small

  82% of all small businesses have less than 5 employees

  The entire province of BC has 6,700 employers with more than 50 employees

  When speaking of property taxes, many politicians look to the idea of differentiating between large and small businesses because they perceive there to be more public support for higher taxes for large business. Although we understand and appreciate the well intended objectives of this proposal, we see a number of difficulties with the concept of creating two business classes from the current one.

  It should be understood that property tax is a tax on land and improvement value and is the responsibility of the landowner to pay. When the landowner leases the use of his or her property it is for a net rent and because the tenant is using the property as if they had ownership for the term of the lease they are responsible for all costs associated with the property. That includes property tax and is regardless of the type of tenant renting.

  Although the tenant usually pays the property taxes the liability for the tax lies with the land owner. So having a different property tax for small and large businesses will mean that the land owner’s property taxes will change dramatically according to the type of tenant she has. Therefore there will be an incentive for the land owner to favour the small business tenant with the lower property taxes. When there is a vacancy some authority will have to determine if a small or large business tax rate is to apply to the property and thus the land owner.

  A major problem with introducing a small business class is how to define a small business and a ‘large business.’ Is it measured in terms of total space occupied, gross sales, net assets, profits, number of employees or other factors? A large property may contain one large business or many small businesses. A small property may be one of many small properties owned by one landowners or a pension fund.

  If, for example, there are two coffee shops in your neighbourhood and one belongs to a multi-national chain and one is an independent owner. Would it be fair for one to have substantially higher taxes than the other? They may both enjoy the similar sales, the same number of employees and perhaps the same rent. Is the public’s interest being served when your neighbourhood encourages small businesses to prosper but ignores the convenience and service of large businesses who may be discouraged to locate locally? Banks, large format grocery stores or restaurant chains for example, might be desired in a neighbourhood for their convenience but may be discouraged by high property taxes.

  Big buildings do not necessarily mean big businesses. May multi-story buildings in downtown Vancouver are home to many small businesses.

  Consider two otherwise identical high-rise office buildings. One building may be occupied by a single company while the other is occupied by numerous small businesses, each renting a share of a large property. Should one property enjoy lower taxes simply because there are many small tenants rather than one large tenant in the building? If a small business class were to be created, would a retailer that had five small stores still be considered a “small business”?

  Using square footage or assessed value as a criterion for defining a “small business” would by itself create significant unintended consequences and inequities.

  The high occupancy levels we see throughout the City of Vancouver suggests that when small businesses leave or cease to be in business, the space they vacate is subsequently occupied either by other small businesses or by large businesses. Assisting all small businesses does not address the specific impacts on individual businesses.

  Businesses provide employment regardless of their size or profitability. They also provide services and goods that are essential to a thriving community. Businesses must also pay for services that are provided by the municipality whether it is police or fire protection or sewers and roads. To require that businesses be responsible for more than a fair share of property taxes can be disastrous to the economic health of a community.

• 14 spartikus // Mar 5, 2012 at 4:08 pm

  There are 3 issues here.

  1. The politics of FTC’s ads and rhetoric.

  2. The business tax shift itself, and it’s effectiveness to achieve it’s stated end.

  3. Alternatives to the business tax shift.

  It has always struck me that the shift is an ineffectual attempt to use tax policy to solve a [alleged] market problem.

  I say alleged because as Julia acknowledges above, there is a high occupancy rate in Vancouver. Obviously there are still people lining up to do business in Vancouver.

• 15 Julia // Mar 5, 2012 at 4:33 pm

  hmmmm. my post got an error message.

  1. agreed -there is more than enough rhetoric from all parties.
  2. From my perspective, the tax shift is a band aid. There has been zero work done on how we got here and how we can prevent ourselves from returning to that 2005 tipping point.
  3. something where consumption is factored in to the mix would be a good start

  How is this a market problem? This is a policy problem from beginning to end.

  Not sure where I mentioned a high occupancy rate. Driven down 4th Avenue lately?

• 16 spartikus // Mar 5, 2012 at 4:51 pm

  There has been zero work done on how we got here and how we can prevent ourselves from returning to that 2005 tipping point.

  What was this tipping point?

  I’ve looked at the statistics and by almost every measure – business licences, incorporations, bankruptcies – there is no correlation with the business tax shift. These do, however, track with the business cycle.
  
  How is this a market problem?

  Because property tax is a reflection of how much your property is worth. It’s the fluctuations in the real estate market that are introducing uncertainty, not property tax rates.

  Not sure where I mentioned a high occupancy rate.

  Julia #12:

  The high occupancy levels we see throughout the City of Vancouver suggests that when small businesses leave or cease to be in business, the space they vacate is subsequently occupied either by other small businesses or by large businesses.

  Governments need revenue and businesses need to be able to plan.

  There are solutions and I’d recommend the Think City link at #10

• 17 Julia // Mar 5, 2012 at 4:57 pm

  Highest tax ratio compared to residential in the country was the tipping point.

• 18 Neil Monckton // Mar 5, 2012 at 5:21 pm

  For those who think robbing Peter to pay Paul is going to solve BC’s municipal financing problems that are 30-plus years in the making consider this — over the past decade, civic governments in BC have seen their reliance on own-source revenue grow at a much higher rate than the province’s — 52% faster.

  To view how unsustainable things have become see this charts here http://www.thinkcity.ca/node/287#Trends%20in%20Local%20Government%20Financing

  Why the FTC isn’t calling for revenue alternatives to the property tax is really the question that needs to be asked.

• 19 Julia // Mar 5, 2012 at 5:33 pm

  Neil, the FTC is a group of volunteers that all have a day job.

  Perhaps you should ask VEC with their 2.6 million dollar budget.

• 20 James // Mar 5, 2012 at 7:07 pm

  I’m not sure what the problem is. When KPMG surveyed the total tax costs of cities around the world in 2010 they found Vancouver had the LOWEST total taxes of 41 big international cities.

  Even with recent changes, Vancouver would be near the top of that list. Vancouver is a great place to do business, and the low tax environment is part of that. But it seems that no matter how sweet the deal, there’s always someone who will demand it be made even sweeter.

  http://www.kpmg.com/ca/en/issuesandinsights/articlespublications/press-releases/pages/vancouverhascanadaslowestbusinesstaxcosts,placingfirstoutof41globalcities-kpmgstudy.aspx

• 21 mary // Mar 5, 2012 at 8:11 pm

  I’m trying to follow arguments here. One thing still puzzles me. I am surprised by FTC’s criticism of the Vancouver Economic Commission. As a city hall insider, I have often been amazed at Council’s willingness to continually raise VEC’s budget while cutting or holding others steady. I could never see the evidence that they were worth the investment. But aren’t FTC and the VEC cut from the same cloth? Don’t they go to the same parties? their kids to the same schools? Explain this to me please.

• 22 Morven // Mar 5, 2012 at 9:02 pm

  On paper, a fairer property tax distribution is a good idea. But so was the HST a good tax, on paper.

  Delivery and deliberation are key elements. So far the tax rationalisation advocates are making a hash of public consultation.

  -66-

• 23 Everyman // Mar 5, 2012 at 9:50 pm

  @Spartikus #14 said:
  “Obviously there are still people lining up to do business in Vancouver.”

  But we know the Mayor’s Happy Planet Juice Co. isn’t one of them. How telling.

• 24 jenables // Mar 5, 2012 at 10:40 pm

  When I saw that the building value (not land, we expect that will increase steadily every year) had tripled in the last three years with zero improvements I thought, hmmn… what could the province and city be conspiring on to screw us like this? What oh what could have happened between 2009 and 2011 to cause such a desperate, obvious money grab? Any guesses? so glad we have spent so much $$ to encourage foreign investment.. . We’ve priced ourselves right out of our market!

• 25 Julia // Mar 5, 2012 at 10:44 pm

  James, you are comparing income tax to property tax – totally different animals.

  Mary, to answer your questions – no, no and no.

• 26 spartikus // Mar 6, 2012 at 8:05 am

  The KPMG report covers total tax cost – that’s all taxes:

  Special Report: Focus on Tax assesses the general tax competitiveness of 95 cities in 10 countries, focusing on 41 major cities with populations greater than 2 million, and compares the total tax burden faced by companies, including income tax, capital tax, sales tax, property tax, miscellaneous local business taxes, and statutory labour costs.

• 27 brilliant // Mar 6, 2012 at 12:51 pm

  What Magee says is often in synch with what Mayor Robertson is thinking? LOL, like “how’s my hair under this bike helmet”?

• 28 Ternes // Mar 6, 2012 at 4:59 pm

  I would like a better answer re: that KPMG report. Given that the report *includes* property tax, doesn’t that completely kill the point that the FTC is trying to make?

• 29 spartikus // Mar 6, 2012 at 5:44 pm

  doesn’t that completely kill the point that the FTC is trying to make?

  Yes. The problems being described by FTC and others aren’t taxation problems. They can’t openly say they want relief from a high real-estate market (because don’t we all) so they go about it indirectly.

  But even if business property taxes were completely eliminated the underlying problem wouldn’t go away.

• 30 Julia // Mar 6, 2012 at 7:08 pm

  Spartikus, perhaps you should ask the FTC the same question before you assume their answer.

  Market value is market value. How tax policy is applied to market value is the problem.

  Take a pie and serve 6. Take a pie and serve 10. It does not matter how big the pie is – the proportions stay the same.

• 31 Lewis N. Villegas // Mar 7, 2012 at 11:44 am

  Why not a separate property tax class so that mom-and-pop businesses are not getting lumped in with shopping centres, large office buildings, parking lots, etc? Toronto has this, so why not Vancouver?

  Neil 11

  I wonder if the distinction could be made at the level of the community plan, or zoning? It may depend on what the total number of businesses are that need “sheltering”.

  We looked at creating co-op market buildings with space for lease at below market rates as a hedge against gentrification:

  http://wp.me/p1mj4z-cc

  We were thinking about providing goods and services at low cost, but we were also thinking about incubator space.

  The tone of the discussion seems to be that an “incubation” period may crop up at different points in the life cycle of a business.

  The discussion is very important because if we are to let go of the land-lift taxes that come with building towers in the neighbourhoods, then one way to pay for neighbourhood infrastructure and revitalization of the arterials may involve Tax Increment Financing.

• 32 Sean Bickerton // Mar 8, 2012 at 12:42 pm

  If the city licensed marijuana farms, Vancouver would have a budget surplus and a greener, more sustainable economy.