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DebraW
09-03-2007, 08:05 AM
Expect a fight as council ponders turfing business tax

Many support raising commercial property tax to replace loss of $90M

Susan Ruttan, The Edmonton Journal
Published: Friday, March 09, 2007

City councillors next week will begin debating whether to scrap the city's business tax.

Edmonton is the only municipality in the region, and one of only a few cities in Canada, to have a business tax.

City administrators are recommending it be eliminated, and that the $90 million it brings in each year be raised by hiking commercial property taxes.

The recommendation, which goes before council's executive committee on Wednesday, has the support of the chamber of commerce but not all city councillors.

Coun. Linda Sloan questions the wisdom of cancelling a tax at the same time the city is pleading poverty to the Alberta government.

"We're still really strapped from a revenue standpoint," said Sloan. "If we're saying to the province, 'We need you to extend more money to us,' how do we say that with conviction if we're giving taxes back?' "

There is no evidence the tax deters businesses from coming to Edmonton, she said.

Coun. Mike Nickel supports phasing out the business tax, but opposes replacing it with higher commercial property tax rates.

"We have a business tax, our regional taxpayers don't," Nickel said. "Edmonton's business tax through the 1980s and 1990s has caused Nisku to explode, Strathcona County to explode, as businesses seek lower costs."

Calgary, Winnipeg and St. John's still levy a business tax. Calgary has frozen its rate and Winnipeg is studying ways to eliminate the tax.

Greg Christianson, president of the Edmonton Chamber of Commerce, said eliminating the tax has value, even if businesses end up paying the same total amount through hikes to property taxes.

"An automatic benefit of combining the two taxes is transparency," Christianson said. "You have one tax, which would be consistent with the surrounding jurisdictions."

Most surrounding jurisdictions levy a machinery and equipment tax, which Edmonton doesn't.

Christianson said the city will save money by collecting one tax instead of two.

Those exempt from business taxes will see higher overall taxes if commercial property tax rates are hiked to replace the taxes. Those include owners of undeveloped commercial land and the federal and provincial governments, which pay grants in lieu of property tax on their buildings.

Janine Halbesma of the Canadian Federation of Independent Business, said council should look at other options, such as cutting its budget, rather than simply raising non-residential property taxes to replace the business tax.

The recommendations about the business tax are based on the work of a special committee that reviewed taxes in 2005. The business tax was also reviewed in 1995 and 1998.

The city mailed out its business tax notices two weeks ago.

The 2007 business tax rate has been raised by 4.95 per cent.

[email protected]

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RichardS
09-03-2007, 09:29 AM
I love how this business tax is supposed to have created things flourishing in Strathcona county et al...what a load of pure BS. There are many many many many many other factors at play here, space, county incentives, environmental influences (a refinery downtown perhaps???;)), proximity to resources, etc. If it was all about this freaking tax, then all businesses would flock to Warburg. Bet you could get a great deal there...tax wise that is.

Dusty Bear
09-03-2007, 02:07 PM
I don't know what the rationale is for having a business tax in addition to the commercial property tax is, but why not get rid of it? Even if the change is made revenue neutral by increasing the commercial rate a corresponding amount, the result is more transparency with a single rate for businesses.

edmowl
09-03-2007, 02:54 PM
Have the BRZ's stated their position. Losing business tax would mean they'd have to replace he levy they get from their members' taxes.

Personally, I don't really see what benefit a business tax brings.

But at the end of the dya, no business tax simply means higher rent so the landlord can cover the cost of commercial property taxes. Either way I pay and in a hot economy that'll inevitably mean pay more.

dwells
09-03-2007, 04:31 PM
I don't know what the rationale is for having a business tax in addition to the commercial property tax is, but why not get rid of it? Even if the change is made revenue neutral by increasing the commercial rate a corresponding amount, the result is more transparency with a single rate for businesses.
The big benefit would be the hundreds of thousand - possibly millions of dollars saved by not duplicating collection functions.

RichardS
09-03-2007, 04:33 PM
So, then streamline away. ...just don't try this excuse that low cost is the ONLY factor a business looks at...

dwells
09-03-2007, 05:11 PM
...just don't try this excuse that low cost is the ONLY factor a business looks at...
You're right, there are many variable that a business will consider.

Depending on the type of operation:
it may be transit access for employees or customers.
it may be proximity to the corporate jet.
it may be accessibility for semis.
it may be parking.
it may be crime rate.
it may be any combination of thousands of other factors

But tax rate is undeniably one of the more prominent factors and usually one near the top of the list and when an oddity like business tax is listed, it is seen as an extra tax that is not demanded by most other locales.

Dusty Bear
09-03-2007, 05:31 PM
Have the BRZ's stated their position. Losing business tax would mean they'd have to replace he levy they get from their members' taxes.

Personally, I don't really see what benefit a business tax brings.

But at the end of the dya, no business tax simply means higher rent so the landlord can cover the cost of commercial property taxes. Either way I pay and in a hot economy that'll inevitably mean pay more.

Is the BRZ funding levied from business taxes? In other communities the levy applies to property taxes. Pretty simple fix, if you ask me.

dwells
15-03-2007, 10:33 AM
So, then streamline away. ...just don't try this excuse that low cost is the ONLY factor a business looks at...
As I stated before, I would like to see the business tax gone and I think that removing it would benefit the image of Edmonton.

However, there is an aspect to this that needs to be considered before we put this to rest.

Most small businesses, and many not so small, neither own their property nor deal directly with the property owner. Instead, they deal through a management company that looks after maintenance of the property and manages the operating costs. The management company collects a percentage of the cashflow as part of their fee.

My concern is that taking payment of this tax out of the hands of the business owner and offloading it to the management company by adding it to the commercial property tax would add to the cost of operating the small business.

Dusty Bear
16-03-2007, 11:24 AM
My concern is that taking payment of this tax out of the hands of the business owner and offloading it to the management company by adding it to the commercial property tax would add to the cost of operating the small business.

It won't be perfect, but the overall effect is revenue neutral. Instead of paying the business tax directly, the business owner pays the amount through property taxes via the cost of the lease.

dwells
16-03-2007, 01:46 PM
It won't be perfect, but the overall effect is revenue neutral. Instead of paying the business tax directly, the business owner pays the amount through property taxes via the cost of the lease.
I understand that and that is essentially what I tried to say. But revenue neutral to the city does not translate to an equal cost to the business. Every time property managers handle a dollar, they keep a part for themselves. Over a year these pennies and nickels add up to some serious cash.

When you add these costs to the plethora of licenses, fees, permits and ever increasing common area costs that are required to operate a small business in Edmonton, the accumulated costs often are the proverbial straw.

I am all in favor of dumping that tax. I'm only trying to point out that there may be a cost attached to the savings.

DebraW
20-04-2007, 11:59 AM
Push on to ditch business tax

Businesses say taxing them twice sends bad message, but councillor fears loss of revenue

edmontonjournal.com
Published: Friday, April 20, 2007

City council should abandon the business tax to compete more effectively with neighbouring municipalities, says Greg Christenson, chairman of the Edmonton Chamber of Commerce.

“We’re the only one with two taxes,” he says. “That sends a bad message.”

City council will hold a public hearing May 2 on a proposal to eliminate the business tax and offset the revenue loss through higher non-residential property tax.

Put it all together,” says Larry Benowski, general manager of the city’s planning and development department. This would reduce tax-related work by city and business staff, he says, and it would be “revenue neutral,” neither raising nor lowering the city’s total tax take.

Business taxes are paid by business owners. Non-residential property taxes are paid by business property owners but typically are recovered from business tenants through rents.

So business owners ultimately pay both taxes — directly or indirectly. And both taxes are similarly calculated on the rental value of business premises. So, with some exceptions, the same people would pay much the same taxes.

Edmonton now is one of only four Canadian cities, along with St. John’s, Winnipeg and Calgary, with a business tax. None of the capital city’s surrounding municipalities have it, so local businesses cannot easily compare total taxes.

Coun. Linda Sloan was a minority voice opposing the elimination of the business tax when she served on the tax review committee.

She does not think the loss of $90 million in annual business tax revenue would be fully and fairly offset by higher non-residential property taxes. She believes the city’s total tax revenue could fall — or the burden on some struggling businesses could rise.

Benowski agrees that “we have to do more work on those businesses and property owners that would be affected, to come up with a detailed implementation plan.”

[email protected]

Business reporter Ron Chalmers will have a full report in Saturday’s Journal.

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m0nkyman
20-04-2007, 12:41 PM
And for those of us who own our own building it's just goofy. Property tax, business tax and business license. :smt120

DebraW
02-05-2007, 10:51 PM
Edmonton close to getting rid of business tax

Gordon Kent, edmontonjournal.com
Published: Wednesday, May 02, 2007

Edmonton edged closer to eliminating the business tax Wednesday in a move that would lower taxes by an average of six per cent for most firms.

Under the change recommended by executive committee, the tax, which has been collected since 1918, would be eliminated over four years and the $90 million it brings in annually would be added to the charges already imposed on commercial, industrial and other types of business property.

Coun. Linda Sloan raised the concern that facilities in Edmonton need billions of dollars worth of work.

“How do we explain to the provincial government that we have opted … (to) give businesses a six-per-cent tax cut when we have a lot of our infrastructure deteriorating?”

Mayor Stephen Mandel said it’s too expensive to have two different systems.

“We need to be more clear,” he said. “People know what they’re being taxed on rather than having a business tax and then a property tax.”

The move should free up about seven assessors now assigned to this field, assessment and taxation branch manager Rod Risling said.

On average, it will also cut city taxes for most firms by six per cent, he said. Currently the city raises nearly $300 million from taxes on business and non-residential property.

Organizations that don’t pay business taxes — the operators of power, cable, pipeline and similar “linear” systems, owners of vacant commercial land and other levels of government — will contribute an extra $17.7 million annually as their property taxes rise.

Business taxes are based on the value of space used to operate a company. They’re assessed on the typical net annual rental value for such premises, not a company’s actual rent or profitability.

The issue has been examined four times since 1989, most recently when a tax review committee suggested getting rid of the measure in 2005.

The change, which must still be approved by city council next Tuesday, won’t affect homeowners or increase total city revenues, Risling said.

Several business groups called for elimination of the tax during a public hearing, as the first step in an overall improvement to the way businesses are taxed. Edmonton Chamber of Commerce chairman Greg Christenson said that with a strong economy and low vacancy rates “now is the time to act.”

But Doug Hamilton of the Northern Alberta Shopping Centre Association opposed the move, arguing landlords won’t be able to pass on property tax hikes to tenants if they have empty space and will see their costs go up instead.

The only other Canadian cities with a business tax are Calgary, St. John’s, NL, and Winnipeg, which is in the process of removing it.

[email protected]
© Edmonton Journal 2007

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dwells
03-05-2007, 04:07 AM
But Doug Hamilton of the Northern Alberta Shopping Centre Association opposed the move, arguing landlords won’t be able to pass on property tax hikes to tenants if they have empty space and will see their costs go up instead.

Hurray!!

Maybe they will be a little more reluctant to turn away prospective tenants and leave premises vacant for extended periods. It's about time we stopped forcing struggling businesses to subsidize landlords who keep holding out for higher rent.

kcantor
03-05-2007, 02:07 PM
But Doug Hamilton of the Northern Alberta Shopping Centre Association opposed the move, arguing landlords won’t be able to pass on property tax hikes to tenants if they have empty space and will see their costs go up instead.

Hurray!!

Maybe they will be a little more reluctant to turn away prospective tenants and leave premises vacant for extended periods. It's about time we stopped forcing struggling businesses to subsidize landlords who keep holding out for higher rent.
perhaps from a different perspective :) but we agree on this one - it is ultimately a regressive tax. those that "can" afford it are in a position to pass it on anyway while those that can't are unable to avoid it whether it is being paid directly or being passed on to them.

once the emotion is removed, it is a perfect example of how too much interference in the market place has totally unintended consequences - a tax probably originally intended to reduce the need to tax individuals or those less likely to be able to afford them ends up distorting the marketplace and placing the ultimate burden back on those that can least afford it. much like the discussions on rent controls.

even if property taxes are increased by an amount equivalent to the business tax, it will apply to a broader segment (ie vacant lots which will make some here happy :) and pipelines as noted) so will be "spread out" more and it will not require a duplicate collections structure to raise the same amount of tax dollars.

Bryguy
03-05-2007, 05:29 PM
Well I like the sound of this idea.

As I see it:
- The city saves money
- The city 'should' earn roughly the same as before.
- Property owners are further encouraged to lease their properties as much as possible (more shops)
- Businesses that lease their space will 'most likely' pay similar to before, or less.

With potential dangers such as:
- Businesses might end up paying more overall.
- The city might not earn the same as before in taxes.

As long as they do the switch over in increments and check that it's more promise then peril before the next increment, I'd say start tomorrow.

Maybe it'll work great, maybe it won't.
Maybe they might come across a balance along the way that works better then either option. We'll never know unless they try.

dwells
04-05-2007, 05:17 AM
- Businesses might end up paying more overall.
In that property management companies take a percentage of the cash flow as a fee, the businesses leasing space in such managed properties will pay that fee in addition to the tax. But that should be more than compensated by the tax redistribution due to the addition of now taxable vacant space.


- The city might not earn the same as before in taxes.
According to the media reports, the changeover should be revenue neutral for the city. However, the tax revenue would be more stable since it is no longer tied to business survival and space occupancy.

Bryguy
04-05-2007, 04:32 PM
I agree, everything should balance out. I was just mentioning potential issues.
Although the fact that the tax revenue would be more stable is yet another reason why I think it's a good idea.

Other then the fact that the city will save money due to less duplication everything else is an assumption.
Although based on the vote and opinions mentioned in this thread I think it's safe to say the majority of people believe it's a good idea.



“How do we explain to the provincial government that we have opted … (to) give businesses a six-per-cent tax cut when we have a lot of our infrastructure deteriorating?”
I think it's fairly simple how to explain this.
Regardless who owns the properties the businesses will ultimately be paying the same amount of taxes. The money saved could be used to further aid our deteriorating infrastructure.

If you raised residential property taxes you would expect rental rates to increase to cover the cost, would you not?

However if you truly believe that the current situation is better then the alternative then we should lower residential property taxes and start taxing every dwelling in the city. Sure it's more work and would cost more... but we're lowering property taxes, right?

Right now my only concern is this 4 year plan - the sooner we do it the more we will save. Couldn't this be done in months, not years?

DebraW
05-05-2007, 11:02 AM
Tax goal good

The Edmonton Journal
Published: Saturday, May 05, 2007

Mayor Stephen Mandel makes persuasive arguments for eliminating the city's business tax. Council should take his advice, as long as it doesn't turn into an ill-timed tax break. As Mandel knows, every penny is needed these days to fill potholes, fix bridges and build recreation centres, among other things.

Edmonton businesses pay property taxes on their commercial buildings and that brings in about $196 million, compared to the $291 million in property taxes paid by homeowners.

Unlike other businesses in the region, however, they also pay a business tax (assessed on an arcane 1914 formula involving potential rental value of their premise) which brings in $90 million.

Mandel and the Chamber of Commerce say it's time to end this competitive disadvantage to Edmonton, and they're right. The fact that only three other cities across the country still have a business tax reinforces the mayor's case.

The city administration says the move will be revenue neutral. Some businesses, including cable companies and pipeline companies, will pay higher taxes on their non-residential property to make up the difference. Most will get a six-per-cent decrease.

But Coun. Linda Sloan is not convinced the loss of the $90 million will be completely offset. "My position is the city badly needs the revenue," she says. The city administration should make sure there won't be a loss of revenue in years ahead, if the tax is cancelled.

Getting rid of the business tax should not be about making the load lighter for one group of taxpayers, but rather about making tax collection simpler and more efficient, and levelling the playing field in the region.

Mandel, like other mayors, is on a campaign these days to win additional taxing powers for cities. His case for those additional sources of revenue will be stronger if it's clear he's not giving up badly needed revenue from the sources he already has.

© The Edmonton Journal 2007

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dwells
05-05-2007, 12:17 PM
But Coun. Linda Sloan is not convinced the loss of the $90 million will be completely offset. "My position is the city badly needs the revenue," she says. The city administration should make sure there won't be a loss of revenue in years ahead, if the tax is cancelled.

Getting rid of the business tax should not be about making the load lighter for one group of taxpayers, but rather about making tax collection simpler and more efficient, and levelling the playing field in the region.
Help! I thought I understood what this is all about, but if Sloan is concerned at this stage, maybe I should get someone to look at my reasoning and see if I made some false assumptions.

I'll use a hypothetical strip mall with simplified values to show my reasoning. This mall consists of ten units of 1,000 sf each and a paved parking lot in front.

Currently the property tax is $20,000 per year and is passed to the businesses. Thus each unit is assessed a $1,000 share of the property tax in addition to the rent. As well, each occupied unit is assessed $2,400 per year business tax payable in monthly installments of $200. When fully occupied, this property generates $44,000 tax revenue. However, a 50% occupancy means the revenue is reduced to $32,000 and a 0% occupancy generates only the $20,000 property tax.

If, under the unified tax plan, the city arrives at a city-wide revenue neutral value on all business property, regardless of occupancy, that would peg the combined tax for this strip mall at $32,000 then the tax for each occupied unit would be down by $1,200 reduced to a total of $3,200 per year, but because the tax is also payable by the landlord on vacant space, the city suffers no loss.

What alternate scenarios can have Sloan worried about losses to the city?

Bryguy
05-05-2007, 01:04 PM
I don't know either.
I can understand some short-term losses because owners may not be able to raise rates immediately depending on the lease terms... but that's probably why it's a 4 year incremental initiative.

Plus any fluctuations or shortfalls in the meanwhile will be buffered by the savings. Maybe only in part, maybe completely.

The only other possibility I can think of is developers with a lot of non-revenue generating commercial property may end up charging businesses more then their fair share. Of course if they start doing that businesses may leave... eventually the developer will either lower rates and/or sell the properties to someone who will build something that will generate revenue.
Regardless which developer owns the property, the city will still earn the same revenue.

In the end the only ones who 'lose out' with this are the very few businesses that have a lot of non-revenue generating commercial property.

Well... that's how I see it.

DebraW
08-05-2007, 11:21 PM
Council cuts business tax

Gordon Kent, edmontonjournal.com
Published: Tuesday, May 08, 2007

City council voted Tuesday to eliminate the $103-million annual business levy in a move some members fear could lead to higher taxes for homeowners.

The business tax is being phased out over four years, starting in 2008. All the lost revenue will be replaced by boosting non-residential property taxes so that this sector will continue contributing a total of approximately $300 million a year to city coffers.

There will be an average six-per-cent drop in municipal taxes for most firms, a cut worth a few hundred dollars to a few thousand dollars.

They benefit because three groups which don't pay the business levy - cable, telephone and pipeline companies, owners of vacant land and other levels of government - will pay $17.7 million in higher property taxes.

But Coun. Michael Phair said he's worried companies might push to reduce the amount they pay even further and shift more of the tax burden onto homeowners.

"I heard most of the presenters (at a public hearing) indicate they thought this was a good first step," he said.

"Most of them were clear that what they saw this eventually leading to was a reduction in the level of taxes. I think that's on the agenda."

Coun. Linda Sloan asked why businesses should receive all the benefit from the change.

"I can't tell you how many fixed-income seniors have contacted me to see if the city can do something about freezing their taxes."

However, planning and development general manager Larry Benowski said eliminating the business tax will have no impact on homeowners.

While companies might argue their taxes should be lower, that's a separate issue and could happen even without phasing out the tax, he said.

"It's the way across Canada. It does make sense. There's duplication of effort. We want to use resources as efficiently as possible."

The move is expected to free up seven tax assessors for other projects.

The only other Canadian cities with a business tax are Calgary, St. John's, NL, and Winnipeg, which is in the process of removing it.

Coun. Kim Krushell called the change "a revenue-neutral shift" which will keep Edmonton competitive as it tries to draw in industry needed for a healthy tax base.

"Regionally, we have some competition ... if we don't start attracting businesses, then we're going to have a lot more problems."

[email protected]
© Edmonton Journal 2007

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DebraW
09-05-2007, 08:40 AM
Business tax necessary

The Edmonton Journal
Published: Wednesday, May 09, 2007

Re: "City business tax solution," The Journal, May 3.

I can't believe city council's executive committee would suggest a six-per-cent cut in business taxes just a few days after homeowners were told their taxes would be going up more than six per cent to pay for the needed repairs to our infrastructure. Do businesses not use our infrastructure when delivering or receiving their goods?

When Canadian mayors are pleading with the federal government for more money to repair sewers and roads and expand transit systems, do we really need to lower business taxes to attract more firms to move here and help overload the systems that are finding it hard to cope now?

I hope councillors will see the folly of such thinking.

Kenneth G. Thomas, Edmonton
© The Edmonton Journal 2007

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