Consultations: Provincial Land Tax Reform: A More Equitable and Modern Provincial Land Tax

November 2016

A MORE EQUITABLE AND MODERN PROVINCIAL LAND TAX

The 2016 Ontario Economic Outlook and Fiscal Review announced changes to the Provincial Land Tax (PLT) for 2017.  These PLT changes will significantly increase tax fairness and reduce inequities in how services are paid for in the North. 

THE PROVINCIAL LAND TAX REVIEW

PLT is the property tax paid in unincorporated areas of northern Ontario outside municipal boundaries. The Province collects the PLT to help fund important community services including policing, land ambulance, public health, and social services in unincorporated areas.

The government announced a review of the PLT in 2013 in response to concerns raised by northern municipalities about significant differences between their property taxes and PLT.  Inequities in the way services are paid for in unincorporated areas compared to northern municipalities is a significant reason why the PLT rate is lower than the average northern municipal tax rate.

Cover page of 2015 Ontario BudgetCover page of 2016 Ontario Budget

The 2015 Ontario Budget announced changes to the PLT for 2015 and 2016.  Before these changes were announced, PLT rates had not been updated to increase revenues in over 60 years.  This initial stage of PLT reform marked an important first step towards creating a fair and modern PLT.

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

PLT Review Consultations

When the PLT review was first announced in 2013, the government committed to consult with northerners and to address their concerns in a fair and balanced way.  Since this time, the government has consulted extensively with unincorporated area property owners and representatives of local roads and services boards and held ongoing discussions with northern municipalities and businesses.

Cover page of published paper, Provincial Land Tax Review: A Summary of Stakeholder Consultations – Feedback Received to Date

In 2014, the government consulted with northern Ontarians and held 21 sessions with representatives of local roads and services boards in locations across the north. 

  • A paper summarising the perspectives and concerns raised by local board representatives in unincorporated areas, businesses and northern municipalities was published in December 2014.

In 2015, the government launched the next round of consultations by holding 15 open houses across northern Ontario.  These sessions provided property owners in unincorporated areas with the opportunity to hear about the 2015 and 2016 PLT changes announced in the 2015 Budget and to provide input.

  • Over 1200 unincorporated area residents participated in the sessions. 
  • These sessions are summarised in a paper published by the Ministry of Finance in February 2016 which is available on the Ministry’s website.
Cover Page of published paper, Provincial Land Tax Reform: Overview of the Provincial Land Tax Open Houses

In 2016, the government sought further input from property owners in unincorporated areas by conducting a PLT Consultation Questionnaire. The questionnaire was based on the key issues raised by property owners at the PLT open houses.

  • Over 270 responses were received from property owners in unincorporated areas.
  • Responses to the questionnaire are summarized in the PLT Questionnaire Results, posted on the Ministry’s website in August, 2016.

What We Heard

Throughout the PLT review the government has heard many views from property owners in unincorporated areas, including concerns related to tax inequities in the North as well as concerns about future PLT changes.  Three key concerns were commonly raised:

1. PLT rate inequities within unincorporated areas

The government heard concerns about the lower PLT rate for residential properties outside school boards compared to those inside school boards, even though there is no difference in the level of services provided.

When asked in the PLT Consultation Questionnaire about their views on the PLT rate differences between areas inside and outside school boards, the majority (57%) of respondents felt that this inequity should be addressed.

In fact, the vast majority (77%) of respondents that owned properties located inside school boards thought that this inequity should be addressed.

Graduation cap icon

The PLT rate difference between inside and outside schoolboard areas should be addressed

Bar chart illustrates that 57 percent of survey respondents agreed and 43 percent disagreed that the PLT rate difference between inside and outside school board areas should be addressed.

77%

INSIDE schoolboard areas property owners think the rate difference should be addressed

36%

OUTSIDE schoolboard areas property owners think the rate difference should be addressed

2. Businesses contributing a fair share

Many property owners also indicated that businesses should contribute their fair share of any future PLT changes.

For example, over 90% of respondents to the PLT Consultation Questionnaire thought that PLT increases for businesses should be the same or greater than increases for residential properties.

Building

PLT increases for businesses should be same or greater than increases for residential properties

Bar chart illustrates that 91 percent of survey respondents agreed and 9 percent disagreed that PLT increases for businesses should be same or greater than increases for residential properties.

3. A need for greater certainty about the end goal of PLT reform

The government also heard that residential and business property owners wanted to know the end goal of PLT reform.  Many property owners found it difficult to plan ahead without knowing how their PLT might change in the future.

PLT Review Findings

In 2014, the PLT review identified inequities in taxation and in how services are funded in unincorporated areas compared to municipalities in the North.

Inequities in How Services are Funded in the North

Prior to the 2015 Ontario Budget, PLT rates had not been updated to increase revenues since the 1950s. Over time, significant differences had developed between PLT and average northern municipal property tax. The average residential PLT in 2013 was $164, compared to the average residential northern municipal tax of $2,200.

Part of the difference between PLT and northern municipal tax can be explained by the fact that unincorporated areas have fewer services than municipalities. Many unincorporated area residents also pay levies to local roads and services boards for services in their communities, most of which are run by volunteers.

However, lower service levels and local board levies paid by unincorporated area residents only partially explain the discrepancy between property taxes in unincorporated areas and northern municipalities.  Differences in the way services are paid for in the North is a significant reason why PLT is lower than average municipal tax.

Gap between PLT Revenue and Expenditures on Services

PLT revenue covers only a portion of the amount the Province spends on behalf of unincorporated areas for important services such as policing, land ambulance and public health.

In unincorporated areas, the Province contributed almost $90 million in 2013 to fund these important services. This was approximately $65 million more than the amount the Province would provide if these services were cost-shared in the same way that they are with municipalities.  PLT revenue was approximately $11 million in 2013, resulting in a gap of more than $50 million between PLT revenue and the $65 million in additional funding the Province contributes in unincorporated areas.

The gap between PLT revenue and provincial expenditures in unincorporated areas is a major factor in explaining the difference between the average northern municipal tax and average residential PLT.

An objective of the PLT reform is to address the gap between PLT revenue and expenditure.  However, the PLT reform will not fully close this gap.  This is because the government recognizes that northern municipalities also receive support from the Province through significant grants and programs.

Tax Inequities Within Unincorporated Areas

Another key finding of the PLT review is that in addition to inequities between unincorporated areas and municipalities, there are inequities among property owners within unincorporated areas.

The PLT rate for residential properties in areas outside school boards was one-sixth of the PLT rate for areas inside school boards in 2013.  This was the case even though both areas receive the same level of services that PLT contributes toward.  In addition to lower PLT rates, areas outside of school boards also do not pay Education Tax.

A MORE EQUITABLE AND MODERN PLT

The tax inequities identified through the PLT review highlighted the need for a more equitable and modern PLT system.  The 2015 Ontario Budget announced a staged approach to PLT reform so that change would proceed at a manageable pace. 

The inequities identified in the PLT review were partially addressed in the first stage of PLT changes announced in the 2015 Ontario Budget.  These inequities will be further addressed by changes announced in the 2016 Ontario Economic Outlook and Fiscal Review.

2015 and 2016 PLT Changes

The first stage of PLT reform announced in the 2015 Ontario Budget adjusted residential PLT rates by adjusted by $10 per $100,000 of assessed property value in 2015, and an additional $40 per $100,000 of assessed value in 2016.  The PLT rate change for business properties was in line with the percentage change for residential properties in areas outside school boards.

Changes to PLT Rates
(Per $100,000 of Assessed Value)
Residential Class 2015 2016
Inside School Board $10 $40
Outside School Board $10 $40

The minimum PLT was set at $50 annually per property beginning in 2016 (up from $6) to ensure that all property owners make a basic contribution toward the cost of important services in unincorporated areas.

While these PLT changes mark an important step toward creating a fair and modern PLT system, a gap still remains between PLT revenue and provincial funding for services in unincorporated areas.

Cover page of 2016 Ontario Economic Outlook and Fiscal Review.

2017 PLT Changes

The PLT changes announced in the 2016 Ontario Economic Outlook and Fiscal Review respond to key concerns raised during the PLT review. 

During consultations with northerners, the government heard about inequities between municipalities and unincorporated areas as well as concerns about PLT rate inequities within unincorporated areas, between areas inside and outside school boards.  Many residents also indicated that businesses should contribute their fair share of any future PLT changes.  In addition to concerns about tax inequities, property owners in unincorporated areas expressed the need for greater certainty about the end goal of the PLT reform.

2017 Residential PLT Changes

For residential properties in areas inside school boards, the PLT rate will be adjusted by $20 per $100,000 of assessed value in 2017. 

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 of school boards.

Changes to PLT Rates
(Per $100,000 of Assessed Value)
Residential Class 2015 2016 2017
Inside School Board $10 $40 $20
Outside School Board $10 $40 $40

With the 2017 PLT changes, the PLT rate for areas inside school boards will be $232 per $100,000 of assessed value.  Once the PLT reform is fully implemented, the PLT rate for these properties will be $250 per $100,000 of assessed value.  This provides property owners in these areas with greater certainty about the end goal of the PLT reform.  However, it is important to recognize that this end goal is dependent on all property owners, both inside and outside school boards, contributing their fair share.

The 2017 PLT rate for areas outside school boards will be $115 per $100,000 of assessed value.  

Managed forest and farm properties in areas inside and outside school boards will continue to be taxed at 25% of the residential PLT rate.

Provincial Land Tax Rates
(Per $100,000 of Assessed Value)
Property Class 2017
Residential: Inside School Board $232
Residential: Outside School Board $115
Farm / Managed Forest: Inside School Board $58
Farm / Managed Forest: Outside School Board $29

2017 Business PLT Changes

Business and residential taxpayers will each contribute an equal share of the projected PLT revenue increase.  Under this approach, the PLT rate change for business properties will be in line with the percentage change for residential properties in areas outside school boards. 

Beginning in 2017, commercial and industrial taxpayers will be taxed at the same PLT rate.

Provincial Land Tax Rates
(Per $100,000 of Assessed Value)
Property Class 2017
Commercial $183
Industrial $183

With these changes for business and residential taxpayers, PLT revenue is projected to be about $26 million in 2017, an increase of approximately $2 million for residential and for business property classes over 2016.  

Continuing to Work with Northerners

The PLT changes announced in the 2016 Ontario Economic Outlook and Fiscal Review will significantly increase tax fairness and reduce inequities in how services are paid for in the North. It will also provide property owners in unincorporated areas with greater certainty about the end goal of the PLT reform.  

The government remains committed to working with northerners to make ongoing improvements and further modernize the PLT system.  This will include ongoing discussions with northerners on ways to enhance tax fairness and improve the PLT system.  These consultations will explore opportunities to build on the measures that were implemented through the 2015 Ontario Budget to support better information sharing with local boards.  The Province will also review options to enhance the PLT property tax relief program for low-income seniors and low-income residents with a disability. 

The government recognizes the need for a manageable pace of change and will move toward the end goal of PLT reform in a staged approach.  By further reducing the gap between PLT revenue and Provincial expenditures, property owners will contribute a more equitable amount toward the cost of important services in unincorporated areas.

The Province has made significant progress in reducing property tax inequities in the North.  As the government continues along the path of reform it remains committed to a fair and modern property tax system in unincorporated areas of northern Ontario.

Accessible chart descriptions:

Chart 1:

This bar graph shows that in 2013, average residential northern municipal tax was $2,200 and average PLT was $164.

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Chart 2:

This bar graph shows $65 million in Provincial expenditure over and above municipal cost-sharing arrangements and $11 million in PLT revenue in 2013, and the resulting PLT revenue-expenditure gap of over $50 million.

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Chart 3:

This bar graph shows property tax rates per $100,000 of assessed value for residential properties inside and outside schoolboards in 2013.  For properties inside schoolboards the PLT rate was $162 plus an additional $212 in education tax for a total of $374 per $100,000 of assessed value in combined PLT and education tax.  For properties outside of schoolboards the PLT rate was $25 per $100,000 of assessed value.  It also notes the PLT rate for areas outside schoolboards was one-sixth of the rate for areas inside schoolboards in 2013.

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