Property Taxes in Canada: Current Issues and Future Prospects

Every year, as cities prepare to set and approve their budgets, debates begin over whether property taxes should increase by more than the rate of inflation. Property tax policy is more than a matter of rate increases, however. Across the country, residents and businesses may have access to different exemptions, incentives, tax breaks, and relief programs, while municipalities may be subject to different policies on how tax rates are set. This paper examines the current state of property tax policy across Canada and finds that municipalities and provinces are facing a number of shared challenges and questions, including: whether to apply progressive property tax rates;the volatility of property taxes;the benefits and drawbacks of using property tax incentives to attract businesses; and the role of provincial property taxes The paper proposes five steps that governments in Canada should take to ensure a fair and efficient property tax system: Remove exemptions that do not have a sound and explicit public policy rationale. Reduce the difference between residential and non-residential property tax rates. Remove redistributive services from the property tax base and avoid progressive rates. Avoid capping and land averaging to prevent inequities in property taxation. Eliminate provincial property taxes.