Aaron Aerts: More property tax changes needed to help Vancouver businesses

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It is no secret that Vancouver’s small business community is struggling in the face of skyrocketing property taxes. Where I live (Cambie Village), I’ve seen businesses shut down and remain empty, the windows covered with decaying brown paper.

It serves as a reminder of a more vibrant small business area that has been decimated by rising lease costs and property taxes. This is not an anomaly. Denman, Main Street, Fourth Avenue, Broadway — think of a densifying area in the city and you have probably seen the same thing, empty storefronts.

For years, the business community’s plea for help fell on deaf ears at city hall. There was talk, but no action. Until now. By the narrowest of margins — six votes to five — the new council took bold action to help lift a bit of the heavy property tax weight off the shoulders of entrepreneurs by shifting two per cent of property taxes off Vancouver businesses and onto residents.

Action is needed as the property tax bill facing business owners has ballooned over the last decade. Based on our survey data, the average Vancouver business owner’s property tax bill is nearly $50,000 in 2019 — almost $10,000 more than they paid in 2015. The property tax shift will translate into a tax reduction of hundreds of dollars for the average Vancouver business — a good start. It also inserts some equity into a system where business owners pay more than 40 per cent of the tax bill, yet only consume just over 20 per cent of city services.

Frankly, it does have a marginal cost for residents — $46 a year on a $1-million property. For those vulnerable residents in Vancouver who may struggle to absorb the tax shift, the city should look at ways to insulate them against the impacts. Many residents say they would be willing to pay an additional 13 cents a day to keep more businesses in their community. Among other things, local businesses provide convenience, an entry point into the work place for our youth, and support local sports teams and charities. In short, they are key to the well-being of our communities.

A tax regime that pushes businesses out of Vancouver is bad for Vancouverites. It will result in a dwindling tax base as local entrepreneurs shut down or move to municipalities with lower taxes. That means higher taxes for the residents and businesses that remain in Vancouver.

Some opponents argue the shift will unduly benefit the Walmarts of Vancouver. This ignores the fact that for every big business, there are 50 small ones. The majority of the benefit will go into community businesses, and immediately starts addressing the property tax issue.

This is no silver bullet. The property tax problem goes beyond just Vancouver, crippling small businesses across Metro Vancouver. While a couple municipalities have started making the tax distribution more equitable, it’s time those lagging behind follow suit.

The province and municipalities must work together to fix the property tax problem facing B.C. business owners. Probably the biggest underlying issue is the broken assessment system that creates massive tax bills on commercial properties zoned for future development. One solution is “split classification assessment” that would significantly reduce the tax burden on many small businesses seeing the largest increases in property taxes. Small businesses need that help sooner than later.

Vancouver council has taken a good first step. The B.C. government now needs to show it too can be brave and be bold. More action will be needed to prevent the further exodus of local businesses from Vancouver.

Aaron Aerts is an economist with the Canadian Federation of Independent Business.

Letters to the editor should be sent to sunletters@vancouversun.com. The editorial pages editor is Gordon Clark, who can be reached at gclark@postmedia.com.

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