UPDATE January 2021: The Ontario budget was delivered on November 5th and contained a major advocacy win for the FDBIA and allied business groups. In 2021, the Ontario Business Education Tax Rate for Toronto commercial property will be reduced to 0.88% from the current 0.98%. This reduction will result in the provincial portion of the property tax bill for Toronto commercial class seeing a $117M reduction.
Background: In 1998, Ontario took over school boards’ authority to set property tax rates, thereby disconnecting school funding from property tax revenue. Residential rates were immediately equalized across the province and an advisory panel recommended moving quickly to equalize business education tax rates as well. It is now 20 years later and Ontario has failed to adopt this recommendation to provide tax fairness to businesses across the province.
- A Toronto commercial property worth $10m pays $26,000 more annually than it would in Halton Region – a 31% premium for no added benefit or service.
- London, Waterloo and Windsor businesses pay the highest rates in Ontario – 59% more than Halton Region.
These rate inequities were highlighted in a 2015 and in 2017 reports by economists from the University of Toronto and Trent University commissioned by the Property Tax Coalition for Growth. Reducing BET rates was on hold until Ontario balanced its budget in 2018 – a promise unfulfilled. However, the above report indicates that equalizing rates immediately would delay balancing the budget by only four weeks and would unlock capital for the creation of 18,000 jobs in Toronto and major Ontario municipalities.
OUR POSITION IN 2018 ONTARIO BUDGET SUBMISSION:
Our position along with the Property Tax Coalition for Growth:
1) Reduce all BET rates to an 0.86% ceiling rate, as outlined in Tomlinson and Found’s report, “Ontario’s Business Education Tax: Still indefensible after 20 years”
- This would mean no tax increase for any business in the province as 0.86% is the lowest urban rate in Ontario.
- A 0.86% rate would still be substantially higher than rates in other provinces with uniform BETs: British Columbia (.48%), Alberta (.38%), Nova Scotia (.312%).
2) Phase-in reductions over a period of 5-10 years. This would:
- Limit provincial revenue loss;
- Reduce the gap between the province’s residential and commercial tax rates (commercial currently 6.4x higher); and
Mitigate cross-boundary tax shifting that causes uncertainty and discourages investment.
Updated January 5, 2021