2016 Ontario Budget
Chapter V: A Fair and Sustainable Tax System

Section B: 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 (MPAC), and other stakeholders to strengthen Ontario’s property tax and assessment system. For example, the Province is providing municipalities with increased flexibility to manage the Business Property Tax Capping Program, moving forward with measures to create a fair and modern Provincial Land Tax (PLT) system, and implementing recommendations of the Special Purpose Business Property Assessment Review (Assessment Review). Building on the success of this work, the Province will be engaging in further consultations with key stakeholders on these and other measures.

Business Property Tax Capping Program

In 2015, the Province initiated a review of the Business Property Tax Capping Program in response to municipal and business stakeholder requests to address the potential for inequities and economic distortions that may result from the program. Based on this review, the government announced significant enhancements to the capping program through the 2015 Ontario Economic Outlook and Fiscal Review. As a result of these enhancements, municipalities will be able to adjust the capping program to best suit their local circumstances and improve the equity and transparency of the property tax system.

The Province will continue consultations with municipal and business stakeholders in 2016 to identify opportunities to further enhance the program. In support of the ongoing review, the government is introducing legislation to facilitate potential future refinements and program flexibility.

Vacant Unit Rebate and Vacant/Excess Land Subclasses

In 2015, the Province also initiated a review of the Vacant Unit Rebate and Vacant/Excess Land Subclasses. Since 1998, these programs have provided tax rebates and reductions to property owners who have vacancies in commercial and industrial buildings or land. The review responds to municipal and business stakeholder concerns regarding the appropriateness of the lower tax level provided through these programs and any unintended implications this has for local economies. Some stakeholders have also noted that Ontario is the only province providing these types of programs in Canada.

The Vacant Unit Rebate and Vacant/Excess Land Subclasses review continues in 2016 with stakeholder consultations on the potential provision of additional municipal flexibility to reflect local needs. The Province is introducing a legislative framework to facilitate potential changes to the programs as a result of the review.

Property Tax Rate Calculation Adjustment

In response to municipal requests, the government plans to introduce a technical adjustment to the provincially prescribed property tax rate calculation. This adjustment would be designed to ensure that when calculating tax rates, municipalities and the Province are able to address any unintended effects due to in-year property assessment changes, such as assessment appeal losses. As part of implementing the adjustment, the Province will also ensure the ongoing integrity of education property tax revenues.

Provincial Land Tax

The 2015 Budget announced changes to the Provincial Land Tax (PLT). Before these changes were announced, PLT rates had not been updated to increase revenues in over 60 years. As a result, property tax inequities had developed in northern Ontario. While this initial stage of PLT reform made important strides in creating a more equitable PLT, the government committed to continue discussions with northerners on ways to further address tax inequities in the north.

The Province initiated the next round of consultations by holding 15 open houses across northern Ontario in 2015. The open houses provided unincorporated area property owners with the opportunity to hear more about PLT changes and provide input. These sessions are summarized in “Provincial Land Tax Reform: Overview of the Provincial Land Tax Open Houses,”1 published by the Ministry of Finance.

During the open houses, many property owners raised concerns related to remaining tax inequities in the north. One commonly raised issue was the lower PLT rate for residential properties outside school boards compared to those inside school boards. Open house participants also noted that businesses should contribute their fair share towards any future PLT changes to better support local services.

The government also heard that PLT reform needs to proceed in a manageable way and should take into consideration the many differences between northern municipalities and unincorporated areas.

The second stage of the PLT review will continue to address inequities in taxation and in how important services are paid for in the north. As part of the ongoing PLT review, the government will consult with northerners on ways to further address tax inequities in the north before determining PLT rate adjustments for 2017.

The government remains committed to transforming the PLT into a fair and modern property tax system.

Strengthening Ontario’s Assessment System

The government is working to improve the property assessment system by implementing the recommendations of the Assessment Review in partnership with the Municipal Property Assessment Corporation (MPAC), municipalities and stakeholders.

One of the key recommendations from the Assessment Review is the introduction of an advance disclosure process, which will enable affected businesses and municipalities to contribute to the determination of assessed values before the assessment roll is finalized. An important objective of this process is to reduce the number and impact of appeals by increasing transparency, predictability and accuracy of assessed values for the next province-wide reassessment in 2016.

To further support these objectives, the Ministry of Finance and MPAC have established an assessment methodology change protocol. This protocol will ensure a consultative approach is taken when a major change in assessment methodology is proposed.

As announced in the 2015 Ontario Economic Outlook and Fiscal Review, the Province has also made improvements to the Request for Reconsideration process to standardize timelines and support the early resolution of assessment issues — a recurring theme expressed during the Assessment Review. The Province will continue to work with stakeholders to introduce refinements that promote the early resolution of assessment issues and the accurate determination of assessed values through the timely sharing of information.

Governance of MPAC

The government proposes to enhance the continuity of MPAC’s leadership by increasing the length of time that members can serve on the board of directors. Currently, board members can serve for a maximum of two terms of up to three years each. It is proposed that the maximum period of service on the board be increased from two terms to three terms. This would facilitate continuity of membership on the board, allow members to make a greater contribution to the oversight of MPAC’s operations and develop the necessary expertise to more effectively fulfil their mandate.

The government will be consulting on potential further changes and plans to introduce legislation to strengthen MPAC’s governance structure and support its objective of remaining accountable to stakeholders while maintaining excellence in assessment service delivery.

Power Dam Special Payment Program

The Power Dam Special Payment Program provides eligible municipalities with mitigation related to the former property tax on hydroelectric generating stations (power dams). The Province has been consulting with municipal and electricity sector representatives on the program for a number of years. During these discussions, municipalities emphasized the importance of stability. In the 2015 Ontario Economic Outlook and Fiscal Review, the Province announced that stable funding would be provided to municipalities under the Power Dam Special Payment Program for 2016.

The Province is pleased to confirm that stable funding with respect to currently eligible hydroelectric generating stations will remain in place for 2017 and future years. This means that municipalities can plan on continuing to receive the same payment under the Power Dam Special Payment Program as they received in 2015, subject to any necessary maintenance adjustments.

Value-Added Farm Activities

The government has heard from the agriculture sector that current property tax increases related to small-scale on-farm agricultural processing and manufacturing can be a disincentive for some farmers to expand and diversify their operations.

Where a farmer conducts on-farm, value-added activities that use their agricultural product to create a new product, the portion of the property that is used for that activity is taxed at the industrial rate. This is intended to ensure consistent property tax treatment and a level playing field between processing activities conducted on a farm and similar activities that are conducted off farms.

The government appreciates the importance of encouraging emerging opportunities in the agriculture sector that will help build a strong rural economy. In 2013, Premier Kathleen Wynne highlighted the importance of the agri-food sector to Ontario’s economy by issuing the Agri-Food Challenge, aimed at creating more local jobs and homegrown food. Many municipalities have also expressed support for encouraging on-farm innovations that benefit local economies and provide additional sources of food to local communities.

To that end, the Province will be working with the farming community and the municipal sector to provide sustainable property tax treatment to farmers who engage in small-scale, value-added activities as part of their farming business, while maintaining a level playing field for large processors.

1 www.fin.gov.on.ca/en/consultations/landtaxreform/plt-openhouses-report.html