It is one of life’s certainties, and taxation is one of the certainties that business grapples with daily across Canada.
Another certainty is that tax rates are going to rise.
With the flood of public money unleashed from the federal and provincial governments to prop up businesses and support idled workers hit hard by the pandemic’s economic devastation, that increase is going to be substantial.
To estimate what that might mean for business viability when the COVID-19 clouds lift, it’s instructive to get a baseline figuring of where those tax rates are today.
The C.D. Howe Institute has done some good work here. Its report card on 2019 business tax burdens provides a comparative snapshot of where Canada’s major cities rank when it comes to business tax rates and their implications for entrepreneurs and investors.
Helpful in the institute’s numbers this time around is the inclusion of provincial business property taxes in its provincial marginal effective tax rate [METR] estimates. That’s significant, because, as the report card points out, property taxes account for roughly half the tax burden on business investment in the 10 municipalities included in the comparison.
The good news for Vancouver is that it has the most competitive municipal business tax percentage (10.4%) of the cities covered. By comparison, Toronto’s municipal business tax is 11.8% and Montreal’s is 27.5%.
The bad news is that B.C., along with Manitoba and Saskatchewan, bears the largest provincial tax burden of Canada’s provinces. But the C.D. Howe numbers are based on pre-pandemic times.
The state of finances in Vancouver and other major Canadian cities now and the collapse of their business tax bases in the face of widespread economic shutdowns point to a radical METR overhaul.
That will have significant implications for future business viability and investment. Crafting the right post-pandemic equation is going to demand astute business leadership and foresight.
The question for B.C. is do its major urban areas have those resources?
