Queen’s Park postponing property tax reform today could hurt businesses tomorrow

Many small businesses have undoubtedly been hit hard by the COVID-19 pandemic. Many must shut their doors for an undetermined period of time, while others have made the difficult decision to lay off staff.

All three levels of government have taken actions to ease the pain, from federal wage subsidies to provincial tax filing deferrals. At the municipal level, many cities have also opted to defer property tax payments. For instance, Toronto has postponed its scheduled withdrawals of all property tax payments (including interest, for both businesses and homeowners) for 60 days. This certainly helps, especially in the short term. However, it does little to ease property tax worries for businesses longer term, particularly if the economic downturn persists.

Indeed, property taxes represent about half of the total tax burden on business investment in many of Canada’s largest municipalities. In other words, this tax plays a huge role in influencing future decisions on where to (re)locate, whether to expand, or how many staff to hire. And yet, local and provincial governments (who levy property taxes) typically charge far higher rates for businesses than residents. In Toronto, Montreal, Vancouver and Calgary, businesses pay rates that are between three and four times those paid by homeowners.

Likely aware of this imbalance, and the need to ease the pressure this tax places on businesses, the Ontario government announced in last year’s fall economic statement that it would seek input on how to improve the tax (i.e. make it more competitive), with an eye to announcing reforms this year. In its recent COVID-19-inspired “mini budget,” however, Queen’s Park decided to postpone its Property Assessment and Taxation Review, citing the need to focus on the crisis at hand.

Though perhaps reasonable from a crisis management standpoint, this delay unfortunately maintains the status quo for businesses in the months immediately after the short-term relief measures expire. That is, businesses large and small still face disproportionate property tax rates for the foreseeable future.

Of course, the COVID crisis deserves a rapid response by all levels of government. However, this does not prevent foresight regarding the economic hardships that await our economy. Business solvency today is important; so is business competitiveness tomorrow. By postponing long-term property tax reforms now, Queen’s Park has delayed an opportunity to signal relief, and competitiveness, for businesses in an increasingly uncertain future.