Ontario should abolish its harmful business property tax to remove an invisible, heavy burden on business.
November 2, 2017 – Ontario should abolish its harmful business property tax to remove an invisible, heavy burden on business, according to a report from the C.D. Howe Institute. In “Flying Below the Radar: The Harmful Impact of Ontario’s Business Property Tax,” author Adam Found assesses the damage the tax does to business investment and the broader Ontario economy.
Ontario is collecting $6 billion in property tax revenue in fiscal 2017/18, notes Found. Ontario established its provincial property tax in 1998 when it took over the local education property tax, inheriting from school boards a tax regime with a relatively heavy burden on business and a wide range of tax rates. The misleading name “education property tax” persists, even though the tax has no bearing on school boards’ expenditures.
Despite owning the tax for almost two decades, the province has made limited progress toward reducing its heavy burden on business and the unjustifiably wide variation in tax rates across and within both municipalities and property classes.
The degree of harm caused by a tax is reflected in how much it reduces its tax base, notes Found. A 10 percent increase in the average combined provincial/municipal effective business property tax rate is estimated to decrease the long-run value of the business property assessment base by 8.2 percent. At the average level of business property taxation in Ontario, a $1.00 business property tax hike costs the Ontario economy an estimated $5.56.
Provincial commercial property tax rates levied in Ontario’s municipalities range from less than 0.4 percent in some Northern Ontario townships, to 1.14 percent in many towns and cities, including Toronto, to as high as 1.39 percent in cities such as London, Waterloo and Kingston. The provincial property tax on industrial property is 1.39 percent across much of Southern Ontario.
“On efficiency and equity grounds, Ontario’s continued application of widely different provincial business property tax rates across and within municipalities and property classes is entirely unjustifiable,” says Found. “Equally unjustifiable is an average provincial business property tax rate that is more than six times its residential counterpart.”
“Ontario should commit to a long-term plan to abolish its property tax, leaving the property tax to municipalities. This measure would greatly enhance Ontario’s competitiveness and business climate.”
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
For more information contact: Adam Found, Metropolitan Policy Fellow at the C.D. Howe Institute and Course Instructor, Trent University; or Benjamin Dachis, Associate Director, Research, C.D. Howe Institute. Phone 416-865-1904; email lbouchard@cdhowe.org