Halifax Eyeing Commercial Tax Reforms To Help Struggling Businesses

HALIFAX – Leading up to Halifax’s 2021-22 municipal budget, there was much debate about commercial tax rates in the city. A staff report earlier in the year suggested that the average residential and commercial tax bills increase by 1.9 percent. For businesses, this would increase the yearly property tax expenses by more than $800, on average.

Many business leaders, and even one councilor, publicly argued that, given the financial strain of the pandemic, there should be no tax increases this year. In the end, the $1-billion budget passed with a compromised increase of one percent.
 
“I think that’s probably how I’d describe it; it is a compromise,” said Halifax Chamber of Commerce CEO Patrick Sullivan. “We had pushed for zero.”
 
“I suspect that was the best they could do.”
 
Even though the one percent increase seems modest, it comes at the worst possible time for many small business owners. Since the beginning of Covid-19 more than a year ago, many businesses are barely staying afloat, and having to pay an extra few hundred dollars in taxes doesn’t help.
 
“I think business owners in Nova Scotia are a little desperate right now,” said Sullivan. “We’re in the middle of a lockdown; many businesses are ordered closed. So, I think they see this as one more cut in the death of a thousand cuts. But it is the smallest increase we’ve seen in a number of years…but it is one more cost.”
 
If one good thing came out of this budget process, it’s that a spotlight has been shone on the need for commercial tax reforms in the HRM. Many people would have liked to give small business owners a tax break this year. But, under the current system, there is no separate bracket for big and small businesses. To create such a distinction, however, the province would have to agree to the changes.
 
“The problem that we have is a lot of businesses have done fine, and the ones that haven’t- the restaurants, the hotels, cultural industries, even our airport; we don’t have any way of just picking them out of the tax rate and saying we’ll give them a (tax break) for the year. We’re not allowed to do that,” said Halifax Mayor Mike Savage.
 
“I think there’s a strong feeling on council that we’d like to change the taxation system so that small and medium-sized businesses…would pay lower rates, so it wouldn’t be based entirely on assessments – it might be based on other factors.”
 
Savage is hoping that the province will be onboard with giving Halifax more control over its taxation system. He believes it will be beneficial for the city.
 
“Allow us to come up with our own tax perimeters because we have to go back to the electorate as well,” says Savage. “We get elected, so it’s not like we’re going to do something wildly inappropriate. We would like to have more levers on our economic development and our cities.”
 
Another measure, that council plans to implement for the next fiscal year is tax averaging. This is a method used in tax scenarios where people are prone to large inflation in income or tax assessments year-to-year. With tax averaging, such a sudden increase will be phased in over a three-year period.
 
Mayor Savage recalls, when he was running for Mayor in 2012, that a local businessman was facing a 100 percent increase in his property assessment, meaning his tax bill would skyrocket. If that business owner could have used a three-year-year average, the increase would have been more manageable.
 
According to an HRM document on the subject dated May 4, the city will collect the same amount of taxes as under the old system, but the newer system will be more “complex.”
 
“In the long run it doesn’t save a lot of money, but it means that people aren’t thrust immediately out of business because of high commercial taxation,” said Savage.
 
Patrick Sullivan says the business community has been lobbying for tax averaging for years. Although he questions whether it’s timely to implement it now. Given the economic effects of the pandemic, businesses may actually benefit from lower assessments in the coming years.
 
“Tax averaging is absolutely something we have proposed to the city in the past…When you’re a new business starting out, it’s tough in the second year of your operation. If the first year’s a partial year, then in the second year of your operation you have to pay 100 percent of your tax bill when you’re just starting out.”
 
“I am concerned that we’ve been pushing for averaging and now we may actually be headed for an average down. Now wouldn’t be the time to have averaging, given that taxes may be heading down for businesses.”

Huddle Today
Derek Montague
https://huddle.today/halifax-eyeing-commercial-tax-reforms-to-help-struggling-businesses/