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Toronto proposes 10 per cent cap on business-tax hikes

Placards in storefront windows on Yonge Street communicate dissatisfaction over business-tax increases. Some business owners initially faced tax hikes of 100 per cent or more.

Christopher Katsarov/The Globe and Mail

Facing a tax revolt from small businesses on a downtown stretch of Yonge Street, City of Toronto officials are proposing to cap all commercial, industrial and multiresidential tax increases this year at 10 per cent.

The move, detailed in a report released on Wednesday, is aimed at helping small businesses survive in neighbourhoods where property values shot up after condominiums went in, as they have along Yonge between College and Bloor streets.

Some small businesses there were initially facing property tax hikes of 100 per cent or more, blamed on sharp increases in last year's provincial property-value assessment and the end of eligibility for some taxpayers for a policy that had capped their tax hikes at 5 per cent.

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The 10-per-cent cap, to be debated next week at Mayor John Tory's executive committee, would be followed by more work on longer-term and more complex reforms, such as the creation of a separate property-tax class for small business, which would require provincial approval.

Last summer, the Yonge Street Small Business Association launched a campaign after members faced massive tax hikes. They targeted the mayor, with some putting up signs announcing they would close their doors and call themselves "Mayor Tory's Business Graveyard."

John Anderson, who runs furniture store Morningstar Trading, led the campaign. He said on Wednesday he was happy with the proposal but added the signs would stay up until he actually sees his tax hike capped at 10 per cent.

He said the cap would mean a $7,000-or-so increase this year on his $55,000 tax bill instead of a $35,000 hike.

But he warned that some businesses might still not be able to handle even that softened blow, listing a half-dozen along Yonge that are gone.

And he said other streets also risked losing their unique character because of tax hikes: "You're going to lose the independent entrepreneur that's interesting and end up with the corporate rubber stamps that you can find anywhere across Canada."

His and other Yonge Street businesses had already received some relief after the province's Municipal Property Assessment Corp. (MPAC) agreed to reassess more than 80 properties along the affected stretch of Yonge Street because of the area's heritage district designation, slicing many of the sudden increases in half or more.

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Local councillor Kristyn Wong-Tam has been working with city bureaucrats for months to find ways to soften the blow. She put forward a motion at council in December calling for staff to study possible reforms for small-business property taxes, resulting in the report released on Wednesday.

She welcomed the cap proposal, but cautioned that it was a stopgap while the city studies tax reforms to help small businesses.

"Certainly, it's an interim move," Ms. Wong-Tam said. "The second step is for them to go and develop the small-business classification."

But the report points out some of the thorny questions surrounding that idea. Among the pitfalls is how to define a small business. Using revenue or ownership, for example, to determine small-business status would require collecting and verifying that information, creating an "administrative burden" that city officials doubt MPAC would take on for free.

City staff say hundreds of business owners faced property tax hikes of more than 50 per cent. They say capping the hikes at 10 per cent will not affect the city's bottom line, as the amounts the city would have otherwise collected will be spread among properties that see assessment-related decreases.

The mayor released a statement endorsing the 10-per-cent cap proposal: "I'm dedicated to making sure Toronto remains affordable for everyone including the many businesses that make our streets so vibrant."

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