Owners of small and medium-sized businesses (SMEs) across the country are rallying against commercial property tax hikes that they claim are unfair.

From Vancouver to Toronto and points in between, SMEs are fighting against differences in business and residential property rates. Business owners claim their inflated monthly payments subsidize municipal services, such as garbage collection, for homeowners.

"It's certainly a hot-button issue for our members - regardless of jurisdiction," says Dan Kelly, Calgary-based senior vice-president of legislative affairs for the Canadian Federation of Independent Business (CFIB), which represents 105,000 SMEs across Canada.

"Property-based taxes are particularly challenging for small and medium-sized firms, mostly because they tend to be fairly property-intensive.

Glen Magder

"So small firms end up getting hit disproportionately hard relative to other businesses."

In Toronto, Mayor David Miller's new property-transfer tax plan - backed by high-profile developers and the Board of Trade - was approved last week.

The City of Toronto has agreed to reduce its business-to-residential tax ratio to the provincial average of 2.2-1 from 3.8-1 by 2015. The original plan was to achieve the reduction by 2020, but the city shortened the deadline by five years after being pressured by the Toronto Board of Trade and other business groups.

The Board of Trade says the reduced timeframe will save businesses approximately $300 million and calls the budget plan "a reasonable compromise."

"We never want to see taxes go up and oppose the land transfer tax in principle," BOT president and CEO Carol Wilding said in a statement. "We have said that taxes should be a last resort to resolve Toronto's financial crisis."

Other civic leaders across the country question where they would get money for services if business property taxes were reduced as much as the CFIB would like.

The CFIB says the problem is not in the market-based method of assessing taxes, but the lack of accountability among municipal politicians who, based on population, must appease a larger percentage of homeowners than business owners.

Businesses are calling for municipal governments to hold the line on property taxes, reduce the differences between business owner and homeowner taxation levels, and spend their money more wisely when providing services.

"If our members were only paying property taxes based on their assessed value, that would be one thing," Kelly says. "But they're being clobbered based on differential rates."

According to the CFIB, Vancouver and Calgary business owners pay five dollars in property taxes for every dollar that a homeowner contributes.

On average, says Kelly, the difference is at least 2-1 across the country.

He notes the mayors of Toronto, Calgary and Edmonton have sought more tax-levying powers from the Ontario and Alberta governments.

But civic leaders say the CFIB has failed to provide alternatives, other than calling for cuts in programs.

Marc Henry, a spokesman for Calgary Mayor David Bronconnier, dismisses the CFIB's claims as the "usual griping" from a lobby group that's paid to complain about taxes.

He says the CFIB is tacitly advocating an increase in residential taxes to compensate for cuts to business taxes, while failing to prove that a problem exists.

"Show me that somehow Calgary hasn't got a thriving small-business community," says Henry. "We do. It's the entrepreneurial capital of Canada. How can you say that somehow taxes are stifling business?" CFIB figures show business owners pay much more in property taxes than homeowners, even when property values are the same and commercial sites cover smaller land areas overall.

In Vancouver, where business property taxes were frozen this year after business groups protested a controversial tax on parking stalls on their premises, business owners make 56 per cent of all property tax payments, but own only 20 per cent of the total property in the city.

But Kelly says he believes SMEs are making some headway in their struggle. The CFIB regards Vancouver's property tax freeze as a major victory, and Kelly notes Winnipeg Mayor Sam Katz plans to phase out business taxes within seven years.

However, Edmonton Mayor Stephen Mandel accuses the CFIB of being narrow-minded by calling for tax breaks from cities instead of more senior levels of government, which receive more tax revenues.

"The (Alberta) provincial government has oil revenues," says Mandel. "They have gambling. They have all the licensing fees. They have income tax, corporate income tax, sales from liquor. I think they have something called royalties from oil and natural gas of about $10 billion a year. We collect property tax."

In Toronto, Board of Trade spokesman Glen Stone notes an Alberta government study shows City of Toronto business property taxes are among the highest in North America.

"We see it as one of the major reasons why the City of Toronto proper has lagged behind both the provincial and national averages in economic growth (and) why the City of Toronto has lost tens of thousands of jobs in the last 20 years, while the surrounding parts of the Greater Toronto Area, what we call the '905 rim' around the city, have gained some 800,000 jobs," says Stone.

"When you can literally look across the street, as you can do at the edge of Toronto, and see competitors that are paying tax rates that are 35-40 per cent lower than you, it's awfully tempting to cross that street - and a lot of people have."

Merchants across the country are feeling the impact of rising tax rates. Glen Magder, co-owner of Glen and Paul Magder Furs in downtown Toronto, says higher taxes in the Ontario capital and lower taxes in surrounding suburbs have reduced customer traffic, the value of his family's building and the vibrancy of the downtown district.

"Less people are coming downtown," he says. "Toronto is becoming a little bit more downtrodden. It affects tourism. Downtown - and the city - is losing its allure for people."

Lorne Weiss, a Winnipeg realtor who serves as chairman of the Manitoba Real Estate Association's (MREA) political action committee, says the fight to reduce business property taxes is far from over in his province.

Provincial law gives both municipalities and school districts the legal authority to levy business and residential property taxes - literally doubling the tax bill for a business owner, says Weiss.

"That (dual collection method) has been a strong challenge to overcome, because it tends to make Manitoba less attractive as a place for businesses to relocate or expand, because of the occupancy costing so high," says Weiss.

A coalition that includes the MREA and Winnipeg Chamber of Commerce and a group of agricultural producers are calling on the province to fund education through general revenues rather than just through property owners.

The lobby has convinced the government to fund 80 per cent of education through general revenues, but property owners are still on the hook for 20 per cent - and business operators pay most of that.

John Wong, an insurance-agency owner who acts as a spokesman for a coalition of small-business operators based in Vancouver-area malls, says his group's members are "struggling to get by" as a result of increases in that province.

Wong, who operates two locations - one in Vancouver and the other in suburban Richmond - wanted to open more outlets but says he could not afford to.

Wong does not blame the difference between commercial and residential rates.

In some cases, he says, Richmond condo owners pay 10 times more than some business owners. Like CFIB's Kelly, he blames increases on poor decisions by municipal leaders.

"The way I look at it, everybody should pay the same rate," he says. "We just want a fair system."

North Vancouver Mayor Darrell Mussatto says his council has to balance the needs of the community with its ability to pay for services.

"It puts us in a very difficult position as a city because we certainly want to deliver services that people want at a price that they can afford," says Mussatto.

(Monte Stewart can be reached at monte@businessedge.ca)