SASKATOON HAS LOWEST TAX RATES FOR BUSINESS: REPORT.
OTTAWA • Saskatoon has the most competitive tax rates on business investments of any major city in Canada, beating Calgary for the third straight year following recent tax hikes in the Alberta region, a new report shows.
Policy think- tank C. D. Howe Institute released its annual report card Wednesday that measures the marginal effective tax rate ( METR) on new business investments in Canada’s biggest cities. Saskatoon earned the highest score, followed by Calgary and Vancouver in second and third place, respectively.
Overall, the highest tax burdens were found in Saint John, Charlottetown and Montreal. Toronto and St. John’s scored around the national average. Saskatoon has led the list since 2015, when it took the top spot from Calgary. Saskatoon’s overall METR fell to 42.4 per cent in 2017, compared with 45.6 per cent five years earlier, according to the report.
Albert’s overall METR, meanwhile, increased from 45.2 per cent to 46.4 per cent over the same period. Vancouver’s overall tax burden has dropped from 54.8 per cent to 48 per cent.
The r eport measured METRs in the biggest cities of every province. Unlike many METR equations, which include retail sales taxes, corporate income taxes and other tax rates, C. D. Howe also measured property taxes and land transfer taxes — two metrics that are often overlooked but account for as much as two- thirds of taxes on new business investment.
“The bottom line is that the way governments have been measuring effective taxes on investment decisions has in fact been excluding the majority of the end costs that businesses face,” said Benjamin Dachis, an associate director of research at C.D. Howe.
Property taxes are typically much higher for businesses than residences, Dachis said. When property taxes were initially introduced in Canada, the proceeds went directly to funding education, but the tax now flows into the broader government pool. Land transfer taxes are levied everywhere except in Alberta, and are effectively imposed every time real estate ownership changes hands.
Some Toronto groups have begun to push back against a proposed property tax hike in the city. On Tuesday, Yonge St. Small Business Association president John Anderson told city council that small retail shops were “being forced out of business” due to the higher property tax rate. The proposal would also raise taxes on residences by just over two per cent, according to estimates.
The C.D. Howe report said Toronto’s proposed property tax changes were “slowing” any improvements the city had made elsewhere in reducing its overall tax burden on businesses.
It also called on governments to include property taxes and land transfer taxes in its overall assessments of tax friendliness. “It is time that governments included this tax in their METR estimates, which would prompt a more balanced and informed examination of the level and mix of business taxation they impose.”
In terms of provincial tax burden on businesses, the report found Alberta continues to slide in METR rankings following a hike in corporate income tax rates, as well as higher property tax rates on both the provincial and municipal level.
“They’re taking a bigger and bigger bite,” said Dachis.