News from the GICC - Business Education tax system needs reform

It is no secret that the property tax system in Ontario is seemingly illogical and a source of great frustration for the local taxpayer.

This is especially true for businesses across the province, particularly as it relates to the uneven levies they are charged to help fund our public education system.

While education funding in Ontario is doled out uniformly across the province on a per student basis by Queen's park, the rate levied to businesses in some communities is more than double the rate businesses are charged in other jurisdictions. There is no justification for unequal provincial tax rates for similar business properties in different municipalities for the very same education system.

In fact, the average business tax rate is more than six times the residential tax rate, and can be up to 10 times higher.

Implementing a fair and uniform business education tax rate will have measurable economic benefits for the province, and will simplify and apply fairness to the system as a whole. This could be but one step towards finally addressing the inconsistent and inequitable nature of Ontario's property tax system. Indeed, a wise tax policy is one that creates minimum distortions to economic growth and development. It is a proven economic fact that taxing consumption, rather than capital (such as business property tax), stimulates investment, jobs and business development. Many jurisdictions around the world have embraced this approach, and have shifted tax burdens away from the local property taxpayer.

The business community understands that equalizing rates to a lower threshold will initially impact the provincial treasury through lower revenues. However, over a reasonable period of time, such costs would be offset through new economic development and increased investment in new production, equipment or human resources.

In addition, the province could streamline and improve other areas of the property tax system, and move to a more efficient harmonized sales tax.