Will taxes be the death of small businesses in Vancouver?
Tax reform in Vancouver is an issue that has been simmering behind the scenes for years, September 25th it's about to come front and centre
The kicker is that the mom and pop store just down the street from that new development gets taxed as if it were the same higher density mixed development, even when it isn't. That's where your runaway train of displacement, or creative destruction, really starts moving.
Increasing density and floor plates can be indicative of a false economy, if not at least an unsustainable one. Because of increased residential density many businesses assume, not always correctly, that there is a growing market for their goods or services.
Witness the phenomenon of "Cold Harbour" though, where businesses in Coal Harbour eventually discovered that the thousands of potential customers they had banked on frequenting their establishments only lived in these glass towers two months out of the year.
The moral of the story is that it is easy to see new towers going up and new drug stores and new restaurant chains moving in and assume that these are signs of a healthy economy, but they also indicate some troubling trends about a city's dependence on property taxes for services, about who is able to own a home, who is able to open a business etc. Locally owned homes, like locally owned businesses are crucial to a strong local economy. Ownership does matter. But back to taxes again.
Businesses, whether they are profitable or not, represent 8% of Vancouver’s property tax base and yet they are paying 50% of the total property taxes. Let me repeat that first part, as dumfounding as the percentages may be. Businesses are not taxed based on how profitable they are, they are taxed based on the value of the commercial property they are in.
Speculation, spot rezonings and other things that raise property values sharply can have sudden repercussions on businesses that have become an integral part of a neighbourhood's culture. Not too mention sell stuff that we genuinely want or need. Spartacus Books, Little Nest, Red Gate, and many other small businesses or arts spaces have succumbed to these shocks throughout our city.
So if you're concerned about your mom and pop stores disappearing this is a very important factor to consider and it's also why those who are concerned about gentrification, loss of affordable arts spaces or displacement in low-income communities should be onside with tax reform as well as questions of built form in Vancouver.
We should tax businesses for what they are, not what the buildings they are in could be
With businesses in Vancouver paying significantly more than businesses in adjacent municipalities it's more likely that a corporate chain can weather the thin margins, rising leases and rising taxes than a small independently owned business.
Recent research by LOCO BC, UBC and the Columbia Institute has shown that locally owned SMEs pump significantly more money directly back into our local economy than large corporate chains, particularly multinational ones.
So don't increase density and floor plate sizes along commercial corridors without clearly considering the impacts, if anything consider decreasing them, down-zoning. This creates more affordable, human scale business spaces and ensures more local ownership.
The built form, local ownership, tax revenues, affordability and neighbourhood character can all be mutually beneficial, but currently they are at odds with one another in Vancouver. We need to change this. We need to better connect built form to local economic development just like we need to better connect our crushingly lopsided business taxes to local economic development.
Not just local economic development but the very nature of our community's numerous retail corridors, our social gathering spaces. Once again, we need to rethink "highest best use" and what this means in the broader context of our communities.
With two experienced and sharp as a tack BIA Executive Directors, Claudia Laroye and Sharon Townsend, taking over the helm of the Fair Tax Coalition from Paul Sullivan and Ed Des Roches the discussion on tax policy and the effect it has on our city will continue to evolve, and with particular focus on our retail corridors and small businesses.
The coalition has done some great work to date but the shift needs to continue if we are to see Vancouver remain competitive and vibrant in our region. We also need to get our heads around hot spots and the rabid speculation that this city has endured for the better half of two decades.
Attending the Tax Commission's open meeting on September 25th is important to anyone who cares about the way our city is evolving, and the future direction it will take. The more of us who show up on the 25th to raise our concerns about the changing nature of our commercial streets and the future viability of our retail corridors the more we can continue to push for tax policies and other measures that will improve affordability and enable independent small businesses to flourish in communities we feel true ownership of and a sense of belonging in.