Vancouver City Council recently approxed a tax shift to help relieve the burden on our small business community. We asked Altus Group’s Ed Furlan to fill us in on how what kind of impact the tax shift will have on homeowners and our downtown Vancouver small businesses. Read on to learn more!
THE BASICS: TAX SHIFT 101
The City of Vancouver Council has approved a 2% tax burden shift from non-residential to residential property classes. The shift totals $15.8 million and will be phased in over three years starting with 1% in 2019, and 0.5% in each 2020 and 2021. Once completed, the residential tax share will increase to 55.9% and the non-residential tax share will be reduced to 44.1%. The decision to shift the tax burden is about redistribution of the tax levy among property classes. This is not the first time that the City has implemented a redistribution of the tax burden. The previous tax shift from non-residential to residential property classes for a total of $23.8 million, phased in at a rate of 1% per year between 2008 and 2012.
WHAT WILL IT COST HOMEOWNERS?
The average assessment of a residential property in Vancouver is $1.7 million. The 1% shift in 2019 will amount to an additional $40 in property tax for these homeowners.
HOW MUCH WILL THE AVERAGE BUSINESS SAVE?
The average assessment of a commercial property is $5.3 million. The 1% shift in 2019 will amount to a reduction of $508 in property tax for these property owners.
WILL IT REALLY MAKE A DIFFERENCE TO SMALL BUSINESSes?
The tax shift is a welcome step in the right direction. This change will help to provide relief for the businesses that need it the most. Specifically, these are the businesses that either own or occupy under-developed properties that are assessed on a higher and better use relative to their existing use. BC Assessment estimates that there are approximately 3,000 commercial properties like this (21%). These properties are most impacted by assessment volatility and consequently, unpredictability in property tax liability.
WHY DO SMALL BUSINESSes MATTER?
Many of these taxpayers are small businesses. Small businesses are important to the character-building of Vancouver’s neighbourhoods. They help to build a sense of community and allow people to “buy small, feel connected” to the landscape that roots them. They provide opportunities for hometown entrepreneurs and act as gathering places for communities. These are the retailers and services that make a place interesting. These are what makes Vancouver, Vancouver.
WHAT COMES NEXT?
Critics are arguing that the 2% shift is a “blanket solution” which does not effectively target those that may need tax relief the most. However, until the City is able to design a more effective system, the annual tax break as a result of the shift can really make a difference in making or breaking a small business. A small business can deploy these savings to retain staff and pay other bills. More need to be done to address the “hemorrhaging” of small businesses out of Vancouver, but this shift should be considered a positive move forward.