City tweaks tax policy

Photo: Colin Dacre

The City of Penticton is changing the way is calculates property taxes.

City council voted Tuesday to shift to a “revenue neutral” approach, moving away from the long-standing practice of setting tax ratios annually.

Previously, the city would set a “business tax multiplier” that would dictate what portion of the tax burden was shared by commercial and residential properties. Penticton currently has one of the lowest business multipliers in the province, 1.58, well below the B.C. average of 2.74.

Taxation consultant Gary Jackson was before council Tuesday to explain the tax ratio system isn’t ideal when one type of property — in Penticton’s case, residential — is going through large changes in valuation annually.

“The ratio is not a very reliable target in the goal to set  air rates,” he wrote in his report to council. “It moves independently with market movement and is difficult to set at a fixed number causing unpredictable tax shifts between classes.”

Instead, the revenue neutral approach sees the city set tax rates equally across each property class and allow the ratios to set themselves based on market forces.

With the new system adopted by council, the new business tax multiplier in Penticton this year will set itself at 1.69.

“The commercial ratio remains low by all comparatives,” Jackson continues. “This report does not suggest that this is an adverse situation to be in, but I believe it is well within a range that it could be left to float with the market and use the revenue neural approach until such a point that the ratio nears the provincial average.”