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Real estate taxes in Canada: Protests on unbalanced ratesMany parts of Canada have had buoyant economies in the past decade. As elsewhere in the world, a good business climate has led to increases in real estate values, followed by complaints from property owners that tax rates are out of balance. Compared to other countries, Canadians are far more likely to protest their property assessments and there has been an increase in property tax appeals. The Canadian public's demand for accurate and fair tax assessment of real estate has come into conflict with government desire for stability in taxation. Policy makers have been trying to find ways to smooth out the rates of change in the amount of property taxes payable during periods of changing real estate conditions. Property owners equate increasing tax bills with increasing assessments, even though government officials have argued that rising assessments do not necessarily translate into increased taxes. These are some of the findings of a study of real estates taxes in 14 countries published in the book, An International Survey of Taxes on Land and Buildings, by Joan M. Youngman and Jane H. Malme of the Lincoln Institute of Land Policy in Boston. With increased property taxes, property owners place a greater emphasis on ensuring that their property assessments are fair and accurate. As appeal costs continue to increase throughout Canada, policy makers are faced with finding cost efficient and more time methods of handling appeals. Deadlines for starting an appeal vary among the provinces and are established by provincial law. There is normally a period of three or more weeks notice in advance of the deadline for submitting a complaint. Assessment or tax notices must include information on the taxpayer's appeal rights and the deadline for filing of formal appeals. The frequency of appeals varies widely among assessing units and is affected by a number of factors. In British Columbia, an average 8.5 percent of property owners appeal their biennial valuation. Of these appeals, 60 percent were changes recommended by the assessor, nearly half of which involved changes to property or ownership after the production of the tax roll. Less than one percent of Quebec property owners appeal. In the past two decades, provincial governments have reorganized assessment administration and change their laws and procedures to achieve greater equity and uniformity. The other side of this coin is a stabilized source of revenue for local governments and schools. Canadian tax authorities have conducted tax impact studies and tried educating property owners about property taxes. Provincial and local governments have expanded exemptions and deferments, and they have begun developing flexible payment plans to provide relieve to lower income taxpayers who have been burden by rising taxes on real estate. The standard for real estate valuation differs among provinces. It is most often highest and best use, although five provinces prescribe valuation at current use for some categories of real estate, primarily agricultural and forest land. All but two provinces require a periodic reappraisal of all property. The specific time intervals between reappraisals vary from one to eight years. Most provinces use the three major approaches to establish real estate values: comparable sales, replacement cost less depreciation, and income. The income approach is most used for commercial or rental properties. The most commonly used valuation method for buildings in three provinces is replacement cost. Comparable sales is generally used for residential properties and land. Six Canadian provinces apply homeowner grants or credits to all owner-occupied principal residences, and other provinces have tax concessions to elderly, disabled or low income homeowners. In the various provinces, computerization of tax assessment records ranges from partial to complete. Digital property maps in use in half of the provinces. Valuation of properties is computerized in five provinces, and underway in the remainder of Canada. Computerization of assessment and tax collection functions has increased in recent years as the cost and size of computers has decreased. Five provinces have nearly all assessment functions and records fully computerized. Seven provinces have valuation lists fully automated. Tax billing and collections are more than 90 percent computerized in seven provinces. Nearly all provinces use computers extensively in residential valuation. Public demands for equity and uniformity will continue to drive the further refinement and evolution of the real property tax system. Other articles in this series: Real estate taxes in Chile Note: The book, An International Survey of Taxes on Land and Buildings, by Joan M. Youngman and
Jane H. Malme is published by Kluwer Law and Taxation Publishers, Boston. Paperback, $32.95. To order, call (800)
LAND-USE within the U. S. For orders outside the U.S., call (617) 661-3016. |
By Kenneth V. Smith