A small tax gesture to city’s small businesses

April 29, 2013

City Council has a great opportunity in front of it. And I will be bold and suggest what they should do.

But first a quick backgrounder – property tax is a combination of a city portion and a provincial portion for education. These two portions make up your total property tax. Property tax is levied to both residential and non-residential properties (i.e., business), and they both pay the full amounts, despite the fact that businesses don’t go to school but they are part of funding the school system.

In the last provincial budget, the province did not take as much for the education portion as was anticipated and therefore left a $52 million opportunity. There were two options: the city could claim that space and take that $52 million; or it could leave it and have taxes go up by less than originally planned.

On Monday, City Council decided to take up that $52 million and add it to their property tax portion. However, the Council has indicated that City Hall will engage with Calgarians as to what they would like the city to do with that $52 million. At Council, a variety of options were discussed including spending it on transit, public facilities and a reduction in non-residential property tax. The fate of the $52 million is yet to be decided and Calgarians have a chance to provide input.

I would like to suggest that it go towards reducing the non-residential property tax. I know what many people are thinking right now: business doesn’t need the tax break, in the tall towers and massive profits. But the picture of Calgary business is markedly different than that. So here is my rationale… .

The majority of businesses in Calgary aren’t what people think of when you think of a “business.” Business is often thought of as major companies in big towers. That isn’t the case here. It may not be well known, but pretty much 90 per cent of businesses in Calgary are considered small business. That means they have under 50 employees. That means that there are somewhere in the magnitude of 35,000 – 40,000 small businesses in this city. Few of them reside in tall towers downtown. Many of these companies are small operations that reside in one of the retail, commercial or industrial areas in the city. They also employ a lot of people.

Recall that homeowners and businesses both pay property tax. But this includes many things that businesses don’t necessarily benefit from: waste collection; recreation and other city amenities. While the argument can be made that they benefit in the long run through the city’s attractiveness as a place to live, the business does not directly benefit from some of the city’s services that they contribute to.

But more importantly, in the current economic climate there is a lot of uncertainty. Many of these small businesses survive off the spending of larger companies or of Calgarians as consumers. Right now, business and consumer confidence are low. People see the news, see markets and see energy prices and are not spending as much as they were. This is a slower economic year, and it is likely that 2014 will be too. Therefore many small businesses have seen their business slow down. They are having a tough time keeping up with slower amount of business. Their revenues aren’t what they have been. And so smaller businesses may not have the funds to weather slower times as well. Therefore they look to reduce costs. Reducing their property tax is one way to help small business.

The health and success of our small business community is essential. They create jobs, they pay tax, they contribute to our economy and our community. They are our favourite restaurant, our drycleaner, our plumber, our tax advisor, and our corner store. They are often intensely innovative. We need to do what we can to support our small businesses through slower economic times.

Reducing the non-residential property tax would be a great signal from City Council that they believe in and support small business. It would say, we see you as important, we need you here and we want to help you survive. Here is something to help while times are slower. This signals that we believe business, particularly small business, is important in Calgary. It means we support entrepreneurship and risk takers. It means that we can support those companies and people that make Calgary the small business capital of Canada (we are by the way…). While it may not be a lot of money, the gesture is symbolic. It is symbolic of recognizing the tens of thousands of companies, who like the first companies in Calgary, took risks to build this great city.

Speaking of which, do you know a great small business? Nominate them for the 2013 Small Business Week Calgary awards.

Adam Legge is president and CEO of the Calgary Chamber