Changes may be coming to property taxes for Vancouver businesses as the city looks at how to best help small business owners struggling with tax bills.
A new tax structure could be in place by next year if council opts to approve a split assessment proposal.
Many business owners have seen their tax bills double or even triple in just a few years because of triple net leases, in which the business owner agrees to pay all of the landowner’s property tax costs.
The leases mean businesses have to pay taxes on the highest and best use of their buildings, including the potential of development, regardless of how much income they're pulling in.
For example, the owner of a business located on a property where a high-rise condo tower could be built overhead would have to pay a tax rate based on that possibility.
It's a policy that has forced some businesses to close.
"Development is good. We need, obviously, more residential and more densification," said Patricia Barnes of the Hastings North Business Improvement Association. "Our small, independent businesses are being charged as though they've got four, five, six stories of residential above them, at a commercial rate, which is basically driving a lot of our businesses out of the city."
The proposed split assessment would create a commercial subclass. It would essentially split up a property's existing and potential use.
"It gives council the flexibility to adjust the tax rate for the development potential so council can set an appropriate tax rate ranging from 'x' per cent lower than the business tax rate all the way to zero, depending on council policy," the City of Vancouver's Grace Cheng told CTV News Wednesday.
A working group was created last year between the province, BC Assessment, Metro Vancouver and several municipalities. The next steps are consultations, getting support from the province and figuring out important details including eligibility requirements and tax rates for potential development.
"In principle, this is a great proposal," said Aaron Aerts of the Federation of Independent Business.
"The devil's in the details. Staff has assured us they would work to develop policy to make sure unintended consequences are mitigated and it provides proper tax relief for those most impacted."
Vancouver Mayor Kennedy Stewart met with Premier John Horgan about the issue last week because the city needs the province to make regulatory changes before it can implement the new tax category.
"We've got to save small business. We have a lot of mom-and-pop and legacy businesses that are totally under stress from the way our tax system works in the province," said Mayor Kennedy Stewart.
"This is a complex and important issue and any changes to the assessment system would apply across the province, so it is important that we take the time to get it right," the Ministry of Municipal Affairs and Housing said in a statement.
But the city says it needs the province to move as quickly as possible to have the changes in place by the fall so they can be implemented in time for next year's tax assessments – something they say is necessary to prevent more small businesses from leaving the city or closing altogether.
With a report from CTV News Vancouver's Sheila Scott
