Vancouver needs a new property tax format for home-based businesses, says the city's top planner.

Larry Beasley, Vancouver's co-director of planning, is calling for a separate tax system for properties where people live and work at home.

"(A home-based business site) is not residential and it is not commercial, and it needs to have its own mill rate," says Beasley.

He made the comments last week during the Sleepless in Vancouver seminar, part of the Vancouver Board of Trade's annual Leadership Summit where industry leaders debated whether Vancouver is becoming a bedroom community for its suburbs. The mill rate refers to the percentage at which a property is taxed.

Larry Beasley

Since about 1910, said Beasley, Vancouver's city council has separated property uses into two categories - residential and commercial - and taxed them accordingly. But property taxes have gotten "out of sync" because most voters who elected politicians were homeowners rather than business owners.

Beasley, considered by many groups to be a world leader in his field, often acts as a consultant to other cities. He is a staunch advocate of mixed-use developments that allow people to live, work and play in the same area.

"Our tax format cannot stop what is a much better way to build cities," said Beasley.

In an interview, Beasley added it's not fair for a home-based business to pay a residential rate because it's not just a residence, and it's not fair for a home-based business to pay a commercial rate, because more than just business takes place there.

He called for the city and the province to collaborate on a new tax scheme for home-based firms. In theory, he said, a home-based business would pay more than the residential rate because the business is profiting from the site's activities.

The B.C. Assessment Authority, a Crown corporation that assesses all properties in B.C., would have to approve any new tax scheme for home-based businesses. While the authority assesses property for taxation purposes, the city sets the proportion of tax that each type of property owner pays.

Beasley said the previous city council instructed staff to work with the B.C. Assessment Authority and any other applicable provincial government ministries on new ways to collect property taxes from home-based businesses. The work is expected to continue under new Mayor Sam Sullivan and city councillors.

Suzanne Anton, a newly elected city councillor who attended the seminar, agreed a new tax format is needed for people who live and work at home. It's not a question of a "tax grab," she said, but an issue of fairness. "The whole property-tax scheme is odd at the moment."

She said a tax format for home-based businesses should be determined, because "we don't want to have groups of investigators peeking in people's windows or knocking on people's doors to see how much of their home they use for business."

When it comes to taxation, each property is assessed according to its market value, classification and applicable exemptions as of July 1 of the previous year.

Suzanne Anton

"I would suggest (a tax category for home-based businesses) is an issue for every municipality in the province," said Anton.

But Frances McGuckin, a leading small-business consultant and author who operates out of her Langley home, says such a tax would discourage many people from starting their own businesses.

Noting that 70 per cent of home-based businesses are service-based, she says many entrepreneurs operate from their homes because they can't afford to own separate business locations.

"That (home-based business property tax) is a very negative move," says McGuckin, adding home-based business owners are paying for a business licence and are also guardians of the neighbourood.

"They're taking care of their families. They're taking care of aging parents," she says, noting her own mother is 96 years old. In other words, says McGuckin, they are providing services that governments don't have to pay for. But many business owners who operate from separate locations can't provide the same benefits, she adds.

"In my opinion, we're doing the community a favour by operating out of our homes," says McGuckin, noting she also cares for a 16-year-old daughter who lives at home. "A (home-based business tax) would hurt a lot of people thinking of starting a business."

McGuckin, author of the book Business for Beginners, opened an accounting business at a separate office in Langley in 1983 but moved it to her home when her daughter was born.

Talk of a home-based business property tax comes while the Vancouver Board of Trade, Vancouver Fair Tax Coalition, Retail Merchants Association of B.C. (Retail BC), the Real Estate Board of Greater Vancouver and other groups are calling for residential property taxes to be brought more in line with commercial taxes. A Vancouver business owner pays 5.47 times more than what a homeowner pays for a property of the same value.

Georges Pahud, president of the real estate board, one of the speakers at last week's conference, said the inequity poses a threat to small businesses.

"Commercial taxpayers are, in fact, subsidizing the ever-expanding residential sector," said Pahud. "The system needs to change."

Vancouver small businesses can't compete with surrounding municipalities, he added.

The Fair Tax Coalition is proposing a gradual 20-year program to bring the ratio of commercial-to-residential tax rate down to 3.5-to-one. In the first year, the ratio would drop to 5.35 times more than residential property owners pay from 5.47.

City council would not require B.C. Assessment Authority approval to adjust commercial and residential rates because there are existing classifications for them, noted councillor Anton.

"It's not something we can do overnight," said Anton. "I suspect it's going to be a pretty gradual thing."

Beasley said the city is working with the Vancouver Board of Trade on ways to revise the residential and commercial rates.

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