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Cities claim victory in tax tussle with business critics
B.C. cities are chalking up a partial win in their long-running wrangle with corporate critics who want them to chop spending and lower business property tax rates.
The provincial government-appointed Expert Panel on Business Taxation considered claims that businesses pay too much property tax but largely sided with the Union of B.C. Municipalities (UBCM) instead.
Cities feared the panel – which included a prominent business advocate – would recommend the province impose a cap or a forced lowering of business property tax rates.
"We're pretty pleased they didn't come down with a heavy hand," said Port Coquitlam Mayor Greg Moore, UBCM's rep on the issue.
"It would not have been helpful to finding solutions if they only suggested one section of local government tax be capped."
Cities argue slashing business property taxes would force them to either jack rates for home owners or gut services.
Their critics say they could still do much more to limit discretionary spending and rein in the wage hikes of unionized workers.
B.C. cities do charge higher business tax rates relative to residential than other provinces, but the panel's report said that's mainly due to faster rising property values here.
"Municipal taxes on business are not one of the primary influences on B.C.'s overall competitive position," it said, but added the burden can be serious in specific situations.
Civic spending has grown faster than the combined rate of inflation and population increase, the report said, acknowledging a key business complaint.
But it said in many cases the accelerated municipal spending is driven by factors beyond local city control, such as senior government downloading.
That's been the core argument of cities, which point to billions of dollars Metro Vancouver taxpayers are having to cover in recent and future upgrades to sewage and water treatment as a result of changing federal government regulations.
One of the five panelists was Canadian Federation of Independent Business executive vice-president Laura Jones, one of the most vocal critics of civic tax rates.
Moore said he hopes Jones accepts the findings, adding it would be "a little bit contradictory" for her to say something different.
Jones said the CFIB will remain a strong advocate for lower business taxes and civic cost control, adding it will soon release its annual report card critiquing municipal overspending.
"The main preoccupation of the panel wasn't municipal property taxes," she said. "We were very focused on the negative impact of the PST coming back."
As for municipal property taxes, she said the jury is "still out" because the panel's main message is that more study is needed.
The report recommends the province, UBCM and business groups negotiate a system of benchmarks to publicly measure business tax levels and that "practical remedial steps" be taken when rates exceed benchmarks.
"There's no question property taxes are profit-insensitive taxes," Jones said. "There's no question municipal costs have been going up – in some cases due to other levels of government. Those need to be more fully investigated."
The panel's key recommendation is creation of a refundable investment tax credit that rebates businesses the PST they pay on machinery and equipment.
UBCM previously estimated that cutting business rates to CFIB-demanded levels without cutting spending would trigger a 14.5 per cent tax rate of $230 for the average B.C. home.