Commentary

Taxes On Machinery And Equipment Would Make N.B. Businesses Uncompetitive

Image: iStock.

Ron Marcolin is the Divisional Vice President, New Brunswick & Prince Edward Island, for the Canadian Manufacturers and Exporters.

There has been a lot of discussion about property taxes in New Brunswick in recent months, particularly in Saint John.

Some people are arguing that business isn’t paying its fair share. One MLA, Gerry Lowe, went so far as to introduce a bill in the legislature adding a new tax on machinery and equipment. Although the bill has been withdrawn, it is clear that the issue is not going away. Lowe asked a legislative committee to study the issue of property tax exemptions and make recommendations.

Taxes are necessary to deliver effective public services. No one disputes that. But how those taxes are levied and who pays is a matter worth serious public debate. Let’s step back and look at the facts about property taxes in New Brunswick – who pays what, and how does that compare with other provinces?

First, at the Canadian Manufacturers and Exporters, we believe that businesses should pay their fair share – and in New Brunswick, they already do, and then some. Today, non-residential property taxes in New Brunswick are already amongst the highest in Canada and for most industries are higher than the neighbouring provinces of Quebec and Nova Scotia.

Under New Brunswick’s property tax system, businesses are subject to a municipal tax rate equal to 1.5 times the residential tax rate plus a provincial tax rate (which homeowners residing in their homes are exempt from). Add it up, and it works out that non-residential properties pay about three times as much property tax as homeowners.

In Moncton, for example, homeowners living in their home pay $1.6691 per $100 of assessment while businesses pay $4.67895. In Saint John, homeowners pay $1.8044 while businesses pay $4.8819 per $100. And in Bathurst, homeowners pay $1.7944 while businesses pay $4.8669.

So, businesses in New Brunswick already carry a heavy tax burden, something that discourages investment and makes it harder for them to succeed in tough global markets. Now businesses are facing the prospect of an additional tax, one that has the potential to hurt thousands of businesses across New Brunswick.

A Tax on Machinery and Equipment Will Drive Away Investment

The manufacturing sector in New Brunswick employs 31,000 people directly and many more indirectly. A new tax on machinery and equipment will make property taxes five to 10 times higher for companies that manufacture products in their facilities. That will mean their property tax bill will be exponentially higher than what their competitors pay in other provinces.

While manufacturers are hit the hardest because they require significant amounts of machinery and equipment in the manufacturing process, other businesses will also pay much more, averaging a property tax hike of between 20 and 100 percent. It depends on the value of items within the business. It could mean a new tax on things like coolers, ovens, computers and much, much more.

A tax on machinery and equipment is like getting a property tax bill for your home that now includes a new tax on your washer and dryer, stove and refrigerator. The value of the items in your home has no impact on the cost of providing services, yet you are being taxed as though it does. Where is the fairness in that?

No province east of Manitoba charges property tax on machinery and equipment. The only province that taxes machinery and equipment broadly is Alberta and even then, the tax is not applied in the main cities of Calgary and Edmonton.

This tax on machinery and equipment will limit economic growth and drive away investment in New Brunswick. Any tax revenues it generates will be more than outweighed by its costs to our economy.

It’s bad policy.

Fixing The Tax System

One thing most New Brunswickers can agree on is that our tax system, particularly our property tax system, is broken and needs to be fixed. So, let’s fix it.

Let’s have an open, honest and fact-based discussion about taxes in New Brunswick. Let’s create a system that ensures that everyone pays their fair share but that doesn’t penalize one group over another. Let’s give municipalities like Saint John the revenues they need to provide the level of services that citizens deserve.

Adding a punitive new tax to business will make a bad situation worse. It will drive away investment and hurt companies already operating here. New Brunswick needs to be smarter if we want to create a more prosperous province.

You can find out more about New Brunswick property taxes and the negative impacts of a tax on machinery and equipment at www.cme-mec.ca/taxfactsNB.