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Sadly, it’s re-assessment time

March 17, 2016   ·   0 Comments

WE DOUBT THAT MANY READERS will be aware of the fact that 2016 is going to be more than the year that may sadly see Donald Trump elected as president of the United States. It’s also the year when Ontario’s Municipal Property Assessment Corporation (MPAC) goes about re-assessing millions of properties of every conceivable type.

Various forms of property tax have been used throughout history. In Canada, the early system of taxation was a uniform tax based on the value of property owned. Property in Ontario has been assessed for municipal taxation purposes for more than 200 years.

In 1849, ,jurisdiction for property assessment is transferred from Upper Canada to Ontario municipalities. Over time, each municipality developed its own assessment system and methods of valuing property, resulting in inconsistencies in property assessment and the distribution of property taxes.

As late as the 1960s, some properties in Toronto were taxed based on valuations in the 1940s. In 1963, the provincial government appointed the Ontario Committee on Taxation to study taxation and recommend changes. Four years later, its report highlighted many inequities in the assessment system.

In 1970, the provincial government re-assumed responsibility for property assessment, aiming to create a uniform assessment system for all Ontario municipalities. The government introduced market value assessment and the new system was offered to municipal governments on a voluntary basis. Not all municipalities implemented market value assessment, and as a result, property assessments differed from municipality to municipality.

Finally, in 1997 the government introduced the Fair Municipal Finance Act, and transferred responsibility for property assessment from the Ministry of Finance to the Ontario Property Assessment Corporation, which two years later became the Municipal Property Assessment Corporation.

In recent years, province-wide re-assessments have been carried out every four years. Residents’ 2015 property taxes are based on the 2012 valuations, which on average saw that the value of properties had risen between 20 and 25 per cent since 2008.

According to its website, MPAC already has delivered “the 2016 preliminary values for properties to municipalities and taxpayers,” but if so we’ve seen precious little about the findings, which ought to have shown huge increases in valuations within the Greater Toronto Area.

One thing you won’t see in the MPAC website is any admission that current property tax levels are just as inequitable as they were in the 1960s. All one needs to see is the Friday real estate listings in the Toronto media which disclose property taxes bearing little or no relationship to the current value of residential real estate.

Why? Obviously because of the subjective nature of assessment; in the absence of a recent sale, the value of any property is essentially in the eyes of the assessor.

In our view, the entire assessment scheme should be scrapped and replaced by simple calculations of the amount of land and occupancy space owned, modified by local zoning.

The result would be similar taxation of any two similarly sized properties and no need for re-assessments, but merely re-calculations if the size of the property or the amount of occupancy space changes.

Under such a simplified approach, with no need for reassessments there would be no need for MPAC and its thousands of employees. And it would be left to the Province to determine whether the cost of education should continue to be footed partially through property taxes. (One thing few people realize is that property owners in Orangeville pay far more in the education levy on properties than Torontonians, simply because local property taxes are nearly twice as high as those in the city.)

Under the approach we recommend, jurisdiction over property taxation would return to municipalities, and it would be left to local councils to decide taxation rates for residential, commercial and industrial properties.

Determining the appropriate levels would pose a real challenge, but at least everything would be done in public view.

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