The issue with property tax assessments in the province has alarmed many New Brunswickers, including the business community. There are no doubt serious issues to be examined and corrected, but the assessment issue is more serious than simply the increase in costs to the province’s residents and businesses.
The recent increases in the costs of doing business (WorkSafeNB, Land Transfer Tax, HST, corporate tax), looming future costs (carbon tax), and policy decisions (hydraulic fracturing moratorium; one of the highest income tax rates for high-earners), already run the risk of signalling to the world that New Brunswick is closed for business. We can now ill-afford a lack of confidence in the property assessment system. This is why we supported the review that was being conducted by Justice Robertson and now by Auditor General Kim MacPherson. The Auditor General’s concerns regarding the independence of Justice Robertson’s review as well as his subsequent withdrawal further underscores the need to restore confidence in New Brunswick’s property assessments.
However, the scope of the Auditor General’s review is limited to the concerns with Service New Brunswick assessments, which are merely the tip of the iceberg of the issues with the province’s property tax regime. The problems with property tax in New Brunswick are more systemic, pervasive and anti-investment than this singular (although important) issue.
We echo the call made by the New Brunswick Real Estate Association that the Government of New Brunswick establish a task force to review and recommend changes to the province’s property tax system in its entirety. It is our position that the current system has flaws that are having a detrimental effect on both business investment and ordinary New Brunswickers on a daily basis - starting with the provincial tax on commercial and business properties in New Brunswick being amongst the highest in Canada. Two other key issues are: (1) how the land transfer tax is calculated; and (2) the taxation of non-owner-occupied properties.
The land transfer tax rate in the province has jumped from 0.25% to 1.0% over the past decade. Worse, the tax is applied to either (a) the sale price of a property; or (b) its assessed value - whichever is higher
. This further compounds the costs of purchasing property and exacerbates any problems with assessments. For example, according to the New Brunswick Real Estate Association, in the last fiscal year, 55% of homes sold in Moncton were purchased below the assessed value. Other goods and services are taxed at the actual sale price, why not real property? This would mean that the tax charged is responsive to actual market conditions, not an assessment that might be dated, inaccurate, the result of an imputed formula or phantom upgrades.
Taxation on non-owner occupied residential properties, or as it’s unaffectionately known in the province, double taxation on properties, has long been a source of contention. The government is keen to claim there is no double taxation, which, while technically true, requires blinders to not see the effect it has on these property owners and on the potential for investment in real estate in New Brunswick. In brief, if the property is owner-occupied, they pay the local property tax rate. If it is not occupied by the owner then the owner also has to pay an additional provincial property tax rate - in effect, double taxation simply because the owner doesn't occupy the property in question.
We sent a letter to Finance Minister Cathy Rogers last month requesting that a task force be struck to:
- create a property tax system that is predictable and fair;
- develop a property tax system that by design avoid major spikes in assessment increases (anything more than 5% in one year, as recommended by the New Brunswick Real Estate Association);
- conduct a comprehensive review of the province’s entire property tax structure, including relevant existing legislation, to ensure that New Brunswick follows best practices, and is competitive in a global marketplace with a fair and equitable property tax system. This should include, at a minimum, a review of: (1) how Land Transfer Tax is calculated; (2) taxation on commercial and non-owner-occupied properties; and (3) property tax rates.
It is not as if the government is unaware of these issues. In 2012, Minister Rogers’ own department produced a white paper titled “Improving New Brunswick’s Property Tax System” which dealt with every issue
I have outlined here and concluded that they should be corrected. It has been more than 30 years since our property tax laws have been updated, a comprehensive review is overdue.
Krista Ross is CEO of the Fredericton Chamber of Commerce. With more than 950 members, the Fredericton Chamber of Commerce is one of Atlantic Canada’s largest chambers of commerce. A dynamic business organization, the Fredericton Chamber of Commerce is actively engaged in policy development that affects the competitiveness of our members and of the Canadian business environment. It’s vision is Community Prosperity Through Business.