2016 Ontario Economic Outlook and Fiscal Review
Chapter V: A Fair and Sustainable Tax System

Section A: Strengthening Ontario’s Property Tax and Assessment System

A fair and effective property tax and assessment system is critical to support local services and adequately fund Ontario’s school system.

The Province is working with municipalities, the Municipal Property Assessment Corporation and taxpayers to enhance the fairness and effectiveness of Ontario’s property tax and assessment system. To support this work, the government is providing municipalities with increased flexibility to manage business property taxes, including the Business Property Tax Capping Program and business Vacant Unit Rebate and Vacant/Excess Land Subclasses, announcing a review of the property taxation of multi-residential apartment buildings, and moving forward with measures to create a fair and modern Provincial Land Tax system. In addition, the government has initiated a number of consultations in response to stakeholder input, including a review of the property taxation of railway rights-of-way.

Additional Municipal Property Tax Flexibility

The Province is providing additional flexibility to enable municipalities to better tailor property tax programs to reflect their local needs and circumstances, while ensuring the property tax system continues to remain fair and competitive.

The Business Property Tax Capping Program, introduced in 1998 to assist with the transition to current value assessment (CVA), has resulted in continued inequities for some properties. In response to municipal and business stakeholder input, successive enhancements have provided municipalities with increased program flexibility.

To further enhance fairness and transparency for property owners, the government will provide municipalities with additional flexibility to increase equity between properties. Beginning in 2017, eligibility criteria to allow municipalities to phase out the capping program will be broadened and municipalities will have the option to limit the capping program to reassessment-related changes prior to 2017.

The Province has reviewed the business Vacant Unit Rebate and Vacant/Excess Land Subclasses in consultation with municipal and business stakeholders. The review was initiated in response to stakeholders' concerns regarding the appropriateness of the lower tax level provided through these programs and any unintended implications this may have for local economies. The 2016 Budget announced a legislative framework to facilitate increased municipal flexibility for these programs. In response to municipal requests, the Province is now moving forward with changes that will enable municipalities to better tailor the programs to reflect community needs and circumstances, while considering the interests of local businesses.

Multi-Residential Properties

The government has heard concerns about the significantly higher property tax burden for multi-residential apartment buildings and its effect on housing affordability. In response to concerns about this inequity, the Province is announcing a review of the property taxation of multi-residential apartment buildings.

Currently, the average municipal property tax burden on multi-residential apartment buildings is more than double that of residential properties. In fact, many multi-residential properties are taxed by municipalities at nearly three times the rate of residential properties. Property taxes for multi-residential apartment buildings are generally reflected in the rents paid by tenants. Therefore, the higher property tax burden is particularly concerning given the lower average incomes of tenants in multi-residential apartment buildings.

While the review is underway, the Province will take steps to ensure that the high municipal tax burdens on multi-residential properties do not increase. For these municipalities, this means that the municipal property tax burden for multi-residential properties will be no higher in 2017 than it was in 2016. To ensure equitable taxation for education purposes, the Province will continue to set a single, consistent education property tax rate for all forms of housing.

As part of the review, the Province will consult with affected stakeholders including municipalities, renters and apartment building owners.

Provincial Land Tax

In response to concerns from northern municipalities, a review of the Provincial Land Tax (PLT) was announced in 2013 and involved extensive consultations. The review identified inequities in taxation and in how services are paid for in the north. The 2015 Budget announced PLT changes that marked an important first step in PLT reform. However, tax inequities remain because there continue to be differences between how services are paid for in municipalities and in unincorporated areas.

In the 2016 Budget, the government committed to continue consultations with northerners on ways to further address tax inequities in the north before determining PLT rate adjustments for 2017.

A More Equitable and Modern Provincial Land Tax System

During the consultations, in addition to concerns about inequities between municipalities and unincorporated areas, the government heard concerns about PLT rate inequities within unincorporated areas, between areas inside and outside school boards. Property owners in unincorporated areas also expressed the need for greater certainty about the end goal of the PLT reform. The PLT changes outlined in this document respond to these concerns.

  • For residential properties in areas inside school boards, the PLT rate will be adjusted by $20 per $100,000 of assessed value in 2017. Once PLT reform is fully implemented, the PLT rate for these properties would be $250 per $100,000 of assessed value.
  • For residential taxpayers in areas outside school boards, the PLT rate will be adjusted by $40 per $100,000 of assessed value in 2017. This larger adjustment will begin to address the inequity between residential PLT rates inside and outside school boards.
  • Businesses in unincorporated areas will make a proportionate contribution to the PLT changes.
TABLE 5.1 Provincial Land Tax Rates
(Per $100,000 of Assessed Value)
Property Class PLT Rates
2016
PLT Rates
2017
2017 PLT Rate
change over 2016
Residential: Inside School Board $212 $232 $20
Residential: Outside School Board $75 $115 $40

These PLT changes will significantly increase equity in taxation and in how services are paid for in the north. The government remains committed to working with northerners to make ongoing improvements and to establish a fair and modern PLT system.

Review of Railway Right-of-Way Property Taxation

In response to municipal requests, the Province initiated a review of the property taxation of railway rights-of-way. As part of this process, the Province is holding ongoing consultations with municipalities and representatives of the railway industry and has received valuable feedback that will inform the review going forward.