Annex 5: Property Tax

The Panel’s assessment of the commercial-industrial-farm property bases

This annex has dealt only with the residential portion of property taxation. The remaining property tax is levied on commercial-industrial and farm property.

The base for the commercial-industrial component is still measured using a multiconcept approach, including the weighted sum of:

(a) the replacement value of industrial and commercial buildings as measured using capital stock data from Statistics Canada; and,

(b) a variable related to land values, estimated for each province by a formula with a number of inputs:

• The province’s GDP at market prices for those industrial sectors deemed to be commercial or industrial.
  
• A complex adjustment factor related to urbanization which is derived from several subvariables.
  
• The national ratio of land values to building values in the commercial-industrial sector.
• The national stock value of commercial and industrial buildings.

Like the multiconcept base for residential property, a better conceptual framework for measuring revenue-raising capacity from the commercial-industrial-farm property tax is needed. Unfortunately, little progress has been made on developing a replacement base, in part because most of the work undertaken by federal and provincial officials has focused on the residential property base. Developing a new approach for commercial-industrial-farm property tax revenues will require years of conceptual and statistical work. Given that no alternative has been developed that would be clearly preferred over the current multiconcept base, the Panel is not recommending any changes to these components of the property tax base at this time.

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