TORONTO, Oct. 16, 2013 /CNW/ - Business property taxes are a major part
of the tax burden on new business investment that can tip the balance
in the competition for capital among Canadian cities and provinces,
according to a report released today by the C.D. Howe Institute. In
"What Gets Measured Gets Managed: The Economic Burden of Business
Property Taxes," authors Adam Found, Benjamin Dachis, and Peter Tomlinson conduct groundbreaking
research into the impact of business property taxes (BPTs) in
localities across Canada and show where they are highest and lowest.
"Before a business makes a new investment in a locality, it must know
the tax burden it faces; economists call this the marginal effective
tax rate. In this report, we show for the first time just how much
business property taxes drive up that rate in jurisdictions across
Canada," said Adam Found. "At present, business property taxes aren't
included in government estimates of the total tax burden on new
investment, but they should be."
By analyzing the impact of provincial BPTs, the authors find marginal
effective tax rates (METRs) are substantially higher than previously
thought, especially in New Brunswick, Prince Edward Island, Ontario,
and Saskatchewan. By measuring BPTs in the largest city in each
province, the authors find BPTs have the largest effect on METRs in
Montreal, Halifax, Charlottetown, and St. John's.
Large tax burdens due to a BPT - a form of capital tax - show that
governments should include provincial and net municipal BPTs in their
METR estimates. If governments did so, they would be more motivated to
lower BPT rates, thus reducing the tax burden on new investment.
"Including BPTs in estimates of the marginal effective tax rate would
give jurisdictions a clearer picture of their comparative
attractiveness for new investment and motivate them to lower BPTs,"
said Benjamin Dachis.
The C. D. Howe Institute is an independent not-for-profit research
institute whose mission is to raise living standards by fostering
economically sound public policies. It is Canada's trusted source of
essential policy intelligence, distinguished by research that is
nonpartisan, evidence-based and subject to definitive expert review. It
is considered by many to be Canada's most influential think tank.
For the report go to: http://www.cdhowe.org/what-gets-measured-gets-managed-the-economic-burden-of-business-property-taxes/23117
For a Chart of Tax Burden by Major City go to: http://www.cdhowe.org/images/e-brief_166_chart.jpg
For the Technical Appendix go to: http://www.cdhowe.org/pdf/e-brief_166_appendix.pdf
SOURCE: C.D. Howe Institute
For further information:
Adam Found, Ph.D. Candidate, or Peter Tomlinson, Sessional Lecturer, Department of Economics, University of Toronto; or Benjamin Dachis, Senior Policy Analyst, C.D. Howe Institute, 416-865-1904; email: firstname.lastname@example.org.