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Terrace council urged to form task force to study tax rates
THE TERRACE and District Chamber of Commerce has urged city council to form a task force to study the disparity between residential and business taxes.
Gordon Stamp-Vincent, first vice-president of the chamber, proposed a task force to study the taxation issue, saying businesses in the city face operating in an uncompetitive environment.
The business community said that business taxes for small businesses and small industry were too high in a Terrace Economic Development Authority (TEDA) report from July 2012, he added in addressing city council Feb. 12.
Businesses here lose customers to big box stores, online shopping and other competition, he said.
The premise of raising business taxes is that businesses generate revenue while residences do not; however, residences can have rentals in them or home-based businesses but they don't have to pay the business-related costs of either of those.
Businesses don't want to pass off increased business costs to their customers and in the case of some businesses, prices are set by a head office elsewhere, so there's no flexibility, said Stamp-Vincent.
If prices do increase, often customers will shop elsewhere, further reducing the business's ability to absorb tax increases, he said.
In 2012, businesses pay four times what residences paid for their property value.
"It's more difficult to diversify the economy with non-competitive tax rates," said Stamp-Vincent.
Stamp-Vincent recommended that council set up six to eight representatives from business and residents on a tax task force to study the issue and report back to council this fall.
The results can be included in the 2014 city budget, he added.
Councillor James Cordeiro asked on average what percentage of their revenue were local businesses paying on taxes.
Stamp-Vincent said it depended on the business.
Cordeiro asked what the average would be and Stamp-Vincent said he didn't know.
If the burden of taxes is put on businesses, will that attract businesses to come to town or will people move to a cheaper tax jurisdiction, Stamp-Vincent asked.
"And if you think it does not happen, look at the news, with eight Future Shops and seven Best Buy Stores being shut down so little things can mean a lot for a business's setup," he said.
Cordeiro asked if there was any evidence that those stores were closing due to property taxes; it's believed they were closing because technological items sell better on the internet and that both stores have a huge internet presence.
"I'll let retailers know you'd like businesses to move out of town," said Stamp-Vincent.
"I don't think there's evidence they're closing because of property taxes," said Cordeiro adding he believed it was because a retail location was not the best way for them to sell their products.
"You don't think taxes have a part in that?" Stamp-Vincent said.
Councillor Marylin Davies wondered if consumers would buy out of town or buy online if residential taxes were increased so that business taxes could be decreased.
Davies said she talked to businesses and that was their point of view.
"If you put residential taxes up, do they take their money out of town?" she asked.
That would be something for the task force to find out, said Stamp-Vincent.
"I think putting residential taxes up does not help businesses any. Businesses suffer because residents go out of town [to shop]," Davies added.
Maatje Stamp-Vincent, the regional manager for the Canadian Federation of Independent Business, got up to speak as part of the delegation on the business tax issue.
"Do you believe keeping the tax rate for residents consistent from 2005, or fairly close to it, is a reasonable way to go when property values have doubled in that time period and business property values have not gone up in that time period?" she said.
"I trust that is a rhetorical question," responded acting mayor Bruce Bidgood.
"Yes it is. So who needs to bear the burden for providing goods and services? Is it residential or is it businesses? Or should it be 50/50 and if so, why?" Stamp-Vincent asked.
Bidgood said he didn't think a task force would work because it would be impossible to get a consensus.
"You know we deal with a variety of demands on a meagre tax base. We have to make those decisions. When it comes to taxes, there are only a few tax classes. If residential goes up, then business could go down. Conversely I expect you will not get a consensus in Terrace that residents should pay more because businesses should pay less," said Bidgood.
This story has been changed from its original version to add points that were missing.