The commercial property tax rates in Calgary and Edmonton are two to three times higher than residential rates, with little rationale, says a report released on Thursday by public policy think-tank the Fraser Institute.
The report said businesses in the two cities pay much higher property tax rates than residents, which can lead to businesses leaving the area or closing.
“When punitive commercial property taxes force businesses to leave or close, the make-up of our communities and cities can change profoundly,” said Josef Filipowicz, a senior policy analyst with the Fraser Institute and co-author Who Bears the Burden of Property Taxes in Canada’s Largest Metropolitan Areas?
“In both Calgary and Edmonton, businesses face a higher property tax burden than residents, with little justification for the higher rates. Property taxes should reflect the level of services used by ratepayers, so local and provincial governments need to demonstrate how businesses in Calgary and Edmonton consume two to three times the local services that residents do.”
The study analyzes the ratio of municipal and provincial property tax rates (including education) paid by residents, businesses and industries in Canada’s major urban areas.
“In the Calgary area, the average commercial property tax rate was 1.8 times – or nearly double – what the average residential property tax rate was in 2018, the most recent year of comparable data. But in the City of Calgary itself, commercial property tax rates were three times that of residential properties, the highest in the region,” said the report.
“By comparison, the ratio between commercial and residential tax rates were significantly lower in Airdrie (1.8-to-1) and Cochrane (1.4-to-1). Likewise in Edmonton, while the regional average ratio between commercial and residential tax rates was 1.7-to-1, the City of Edmonton had a 2.5-to-1 ratio, which is higher than Strathcona (1.8-to-1) and St. Albert (1.4-to-1).”
The report said higher tax rates on businesses can erode competitiveness, leading to migration of businesses, reduced hiring and investment, and business closures.
Mario Toneguzzi is a Troy Media business reporter based in Calgary.