Empowering All Municipalities to Create Tax Subclasses
Whereas the assessment values established by the Saskatchewan Assessment Management Agency for the 2017 revaluation year showed a substantial increase for residential assessments, while commercial and commercial resource did not see as much of an increase, posing a problem for municipalities when they want to encourage development within their communities; and
Whereas The Municipalities Act restricts authority to create tax subclasses to the province, giving most municipalities no way of establishing fair taxation for the commercial resource, without local commercial businesses and residents seeing a substantial tax increase; and
Whereas municipal legislation authorizing council members to abate any portion of municipal taxes does not allow for fair taxation within a specific tax class, and leaves councils open to accusations of bias; and
Whereas The Cities Act sections 254(1) and 255(3) authorize cities to establish property subclasses within the agricultural, residential and commercial tax classes for taxation, and these sections could easily be replicated in The Municipalities Act;
Therefore be it resolved that the Saskatchewan Urban Municipalities Association advocate the Government of Saskatchewan to amend The Municipalities Act to empower towns and villages to create tax subclasses within the agricultural, residential, commercial, and commercial resource tax classes, to improve fairness of the municipal tax system.
- The information provided with the resolution is not all correct.
- While circumstances in individual municipalities may vary, data submitted to the ministry by all municipalities does not show a higher rate of residential assessment growth over commercial and industrial assessments. Municipal mill rate survey data shows that from 2016 to 2017, assessments for all residential classes in urban municipalities of Saskatchewan increased by 33.4 per cent while assessments for commercial and industrial classes in urban municipalities increased by 41.4 per cent.
- The Municipalities Regulations establish agriculture, residential, and commercial/industrial property classes for municipal property taxes. The resource property class is for the purposes of education property tax and not municipal property tax.
- The ministry is not currently considering amending The Municipalities Act to include subclass authority.
- The reaction of the business sector to subclasses has generally been concern that some businesses would be targeted for greater unfair taxation.
- A fundamental principle in property taxation in Saskatchewan and across North America is that it is based on the ad valorem principle, that is, property is taxed according to its value. The purpose of revaluation under the ad valorem method is to redistribute taxes based on market conditions, which are not under the direct control of a municipality, the province, or any other single entity. This is considered a fair system of taxation and any distortions created by tax tools such as property sub-classification can move the system further from the fairness principle.
- Saskatchewan’s property tax system already gives a high degree of autonomy to municipalities to set local property tax policies. This includes a variety of local tax tools that urban municipalities have access to, including mill rate factors, minimum tax, base tax, and local property tax exemption. A municipal council may be required to answer to ratepayers for any tax tool that is utilized.
- Subclass authority is not a tax tool that will generate more revenue. Rather, it is a mean to change the distribution of taxes between classes of property. If the subclass authority is used as a revenue tool, for example to target a specific subset of industry with a heavier tax burden, this could cause the industry to vacate the community and/or hamper economic growth.
- Unlike cities, the small number of diverse properties in some towns, villages, and resort villages means that tax shifting resulting from sub-classification could be pronounced. This makes it likely that some subclasses could single out only a few specific properties.
- The addition of subclasses to The Municipalities Act would increase the complexity and inconsistency of the municipal property tax system in the province. The addition of this tax tool will make the calculation of the municipal taxes more complex for municipal administrators and ratepayers. With sub-classification, the property tax regime could be very different between municipal jurisdiction, and subclasses may change in individual municipalities from year to year, which would not support economic investment in the province.