Hiding in Plain Sight: the Harmful Impact of Provincial Business Property Taxes

The Ontario government underestimates its tax burden on new business investment because it measures that burden without taking provincial business property taxes into account, according to a report released today by the C.D. Howe Institute. In “Hiding in Plain Sight: The Harmful Impact of Provincial Business Property Taxes,” Adam Found and Peter Tomlinson recommend that Ontario start including these taxes when it estimates its marginal effective tax rates (METRs) on capital.

The province of Ontario collected $3.8 billion in provincial business property taxes in 2010. This tax on business investment makes Ontario a less attractive place for job-creating investment than the province’s current METR measures imply. “Excluding business property taxes means the province doesn’t get a true picture of its relative attractiveness for new business investment – and doesn’t adequately recognize the economic benefit of reducing those taxes,” said Peter Tomlinson, a sessional lecturer in economics at the University of Toronto.