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:

1. Remove exemptions that do not have a sound and explicit public policy rationale.
2. Reduce the difference between residential and non-residential property tax rates.
3. Remove redistributive services from the property tax base and avoid progressive rates.
4. Avoid capping and land averaging to prevent inequities in property taxation.
5. Eliminate provincial property taxes.

Read the full report

“Property Taxation in Canada: Past, Present, and Future”

This is the second paper in the IMFG series, “Property Taxation in Canada: Past, Present, and Future.”

The property tax has a long history in Canada. It predates Confederation and has long been the country’s central source for municipal revenues. In recent years, governments have also implemented further taxes on property, including foreign buyers’ taxes and vacancy taxes, to address new policy concerns.

“Property Taxation in Canada: Past, Present, and Future” focuses on property taxation in Canada and whether changes are necessary to ensure municipalities can meet 21st-century challenges. Papers by experts from across the country will look at topics that include the role of the property tax in Canadian municipal finance, recent developments in property tax policy, and new challenges that governments face in administering the property tax.

You can read the first paper in the series on the Role of Property Taxes in Funding Cities here