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Commercial property taxes a heavy burden on small business in Canada's biggest cities

Imbalances in how commercial and residential taxes are being applied in Canada’s big cities are making it harder for small businesses to stay afloat, a new report by Altus Group suggests.

“Residents vote, businesses don’t,” said Phil Gertsman, an executive vice-president, British Columbia and national initiatives, with the real estate data company. He said political decisions on tax rates seem to reflect that saying.

Altus Group recently published its latest Canadian Property Tax Rate Benchmark Report, which provides details on commercial and residential property tax rates in 11 major Canadian cities.

Property tax is the main source of revenue for Canadian cities and towns. The rates that commercial property and homeowners pay often differ and depend on the decisions of tax authorities. Those choices often get political, with commercial owners — or their tenants — usually paying more, Gertsman said.

The report reveals that commercial property taxes are more than double that of residential rates in eight of the 11 cities surveyed.

“I don’t know if there is an ideal (tax ratio), and that doesn’t really tell the full story because the full story is told by the level of taxes actually paid,” he told Postmedia in an interview Tuesday. “The tax rate is a function of how valuable real estate is, so if real estate doubles in price, then that is going to dramatically impact the tax rate.”

However, the consequences of soaring higher commercial values in cities like Toronto and Vancouver mean that small business are struggling to keep up with their property taxes. “That’s really … making dramatic changes to the types of businesses that can survive,” he said.

“It changes the nature of those communities, and the employment that takes place there just becomes more challenging,” he said.

Here are the five Canadian cities with the highest commercial-to-residential property tax ratios and their property tax rates (per $1,000 of property value), according to Altus Group’s findings.