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All Over the Map: Business Property Taxes in Ontario

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Ontario established a provincial property tax in 1998 when it took over local education financing, inheriting from school boards a tax regime with a relatively heavy burden on business and a wide range of rates. While the province immediately harmonized residential property tax rates in 1998, business property tax rates remain diverse. This variation comes at an economic cost, since investment decisions are distorted towards some localities or property classes (commercial or industrial) as a result.

In this edition of Graphic Intelligence, we show the wide range of business property tax rates among municipalities in Ontario. Each year since 2007, the province has set a maximum tax rate, called the ceiling rate, and a lower target rate designed to be revenue-neutral for the province. Originally, higher rates were to be slowly brought down to the target rate over time, but this process has stalled since 2013. In the map below, we classify each municipality according to whether they fall above or below this target rate.

You can hover over or click a municipality for more details, and toggle between commercial and industrial rates to see how they compare.

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A. Jacobs, B. Dachis, A. Found, C.D. Howe Institute | Source: Found (2017).

As the map above shows, a wide variety of business property tax rates persists. Despite owning the tax for almost two decades, the province has made limited progress toward reducing either the burden on business or the economic costs of distorting investment decisions.

The ceiling and target rates are legacies of the uncompleted 2007-2014 business property tax reduction program, which was designed to gradually reduce the ceiling rate down to the target rate.  In 2012, Ontario suspended the program, deferring the 2013 and 2014 reductions (more than half the total promised reduction) to 2017/18.  However, neither through the 2017 Ontario budget nor otherwise has the province indicated it currently intends to fulfill these deferred commitments.

To read more about business property tax rates in Ontario, and what could be done to improve them, check out "Flying Below the Radar: The Harmful Impact of Ontario's Business Property Tax," by Adam Found.

Aaron Jacobs is a Researcher, Ben Dachis is Associate Director, Research, and Adam Found is Metropolitan Policy Fellow at the C.D. Howe Institute.

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© 2014 C.D. Howe Institute. All Rights Reserved.

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© 2014 C.D. Howe Institute. All Rights Reserved.