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Robert Murray Haig.

The exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York online

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contains a great deal of information in regard to the subject as it
relates to British Columbia. The feeling in this province is, generally
speaking, favorable to exemption, and the report in question fairly
well reflects public opinion. The policy outlined by the Commission
has practically been adopted by the Government, so that as head of
the Government it must be assumed that I largely concur.

Of course there are ever among those who advocate exemption
of all improvements from taxation differences of opinion as to the
extent to which the principle should be applied. For instance, in
cities it might be questioned whether large or small buildings occupy-
ing similar space should be on the same basis of taxation ; but that is
something for experts to decide and I have not gone into the question
from that point.

There seems to be no doubt but that public opinion in British Columbia
is in favor of the tax on natural resources for provincial purposes rather
than taxation of " products of industry." The general movement in pro-
vincial taxation is in this direction, but the fact remains that at present
the movement has not proceeded far. Incomes, personal property and im-
provements are still taxed in spite of the report of a Royal Commission
favoring the exemption of improvements and the abolition of personal
property taxes, and the announcement of the adoption of those principles
by the Government. What measures will be adopted in the immediate
future is extremely problematical.

The Municipalities

Less than half of the total area of the Province of British Columbia
is included within the limits of organized municipalities. Before 1892 a
number of municipalities had been chartered by special act of the legis-
lature. (1) In that year these early charters, except in so far as their pro-
visions were not repugnant, were brought within the jurisdiction of a
general Municipal Act. All municipalities which have been since created
have been formed under the provisions of this Act. At present there are
sixty-one municipalities. They are divided into two classes: city munici-
palities and district municipalities. This distinction is not a logical one. It
is not based either on the size of the territory included within the municipal

(1) John B. McKilligan, in an address on "Taxation in British Columbia" given
before the International Conference on State and Local Taxation at Toronto in
1908 (Addresses and Proceedings, International Tax Association, p. 304), lists eleven
such municipalities.



169

limits, or upon the population. The city municipalities, it is true, are
usually smaller of area than the district municipalities ; but there are many
district municipalities which are more populous and more important econom-
ically than the city municipalities. Some of the city municipalities have
as small a population as four hundred. The only city in the province con-
taining more than 100,000 people is Vancouver, which operates under a
special charter. The other municipalities, both district and city, operate
under the provisions of the Municipal Act.(l) The tax systems of
Victoria and Vancouver are reserved for separate treatment.

Under the provisions of an Act passed in 1891(2) municipalities were
authorized to exempt " fifty per cent, or all of the value of improvements on
land." The Municipal Act of 1892, referred to above, specified that im-
provements should not be taxed at more than fifty per cent and permitted
complete exemption if the councils of the municipalities desired. This
provision remains a part of the law to-day.

Section 54, sub-section 166, grants the council of every municipality
power " for fixing, if they prefer, the rate of taxation upon improvements
at a lesser rate than upon land, or for exempting improvements from taxa-
tion entirely."

Section 201 reads :

The council may, in every year, pass a by-law or by-laws for
levying a rate or rates on all the land and improvements as assessed
(provided that the rate on improvements shall not be levied on more,
and may, in the discretion of the council, be on less, than fifty per
cent, of the assessed value thereof, or such improvements may be
exempt altogether), to provide for all sums which may be required
for the lawful purposes of the municipality for such year.

Other provisions of the Municipal Act which are of interest from the
point of view of taxation, include that prescribing the method of valuation.

For the purpose of taxation, land and improvements shall be esti-
mated at their value, the measure of which as to land, shall be the
actual cash value, and as to improvements shall be the cost of placing,
at the time of assessment, such improvements on the land having re-
gard to their then condition, but land and improvements shall be
assessed separately. (3)

The assessment of real estate is made annually; the rate for general
purposes is limited to one and one-half cents in the dollar. In addition
one mill may be levied for board of health and hospital purposes ; seven
mills may be levied for school purposes ; and in addition such a rate as may
be necessary to provide for interest and sinking fund claims. (4)

(1) An Act Respecting Municipalities, March 4, 1914, c. 52.

(2) Vineburg, op. cit., p. 78.

(3) S. 199.

(4) The seven-mill maximum for school purposes was fixed upon the recommenda-
tion of the Royal Commission on Municipal Government, 1912. Report, p. 10. The
maximum vv^as formerly five mills. This commission recommended further that the
exemption of church property from taxation be discontinued, but this recommendation
was not accepted.



170

Another interesting provision permits the taxation of wild lands
at a special rate. Wild land is defined as " land claimed by any person
on which there shall not be existing improvements to the value, when
assessed, of ten dollars per acre."(l) Such land may be taxed at a rate " not
to exceed five per cent, of its assessed value." (2) Provision is also made for
labor on the roads by all male residents over twenty-one years of age;
but this may be abolished by the council if it so desires.

Municipalities in British Columbia, then, cannot tax improvements
at more than fifty per cent, and may exempt them entirely. A large number
of the municipalities have taken advantage of the provision permitting them
to exempt improvements.

As will be seen from the accompanying tables, in 1914, fifteen of the
thirty-three city municipalities exempted improvements from taxation and
fifteen taxed them on a fifty per cent, assessment, the maximum permitted
by the Municipal Act. Of the remaining city municipalities, one taxed
improvements at twenty-five per cent., one at thirty per cent., and one at
thirty-three and one-third per cent.

All except four of the twenty-eight district municipalities exempted
improvements entirely. One district assessed them at ten per cent., two
at fifty per cent., and one at full value. This last, Fraser Mills, is an
irregular case. It is explained that almost all property within the limits
of the municipality is owned by one company and since it has practically
all of the taxes to pay it does not care on what basis they are levied. The
assessment in this case is largely a formality.

In response to an inquiry as to the sentiment among the municipalities
on the question of untaxing improvements, Mr. Robert Baird, inspector of
municipalities, wrote as follows, under date of November 12, 1914 :

Referring to the point which you mentioned on the occasion of
your visit here, the present attitude of the municipalities generally
toward the single-tax question, I may say that I have taken some
pains to enquire throughout the province, and while I find that a
fairly large percentage of the taxpayers and members of the municipal
councils are not enthusiastic supporters of the single-tax system, yet
practically none of them would advocate the taxing of improvements
at the present time to their full value, the reason being that there is
temporarily, at least, a very strong antagonism toward the speculator
in land.

Nanaimo, one of the smaller towns in British Columbia, seems to have
been the first municipality in the Dominion to exempt improvements from
taxation entirely. Nanaimo is a community of 8,000 people located on the
eastern coast of Vancouver Island. It is a center for the coal-mining
industry and for herring fisheries. It received a special charter on Decem-
ber 24, 1874, which contained a provision permitting the town to exempt
improvements from taxation entirely. Advantage was taken of this pro-

(1) Municipal Act, s. 2.

(2) Ibid., s. 201.



171



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173

vision at the very beginning. Nanaimo has never taxed buildings and

improvements.

An interview with Mr. A. E. Planta, manager of the Dominion Trust

Company of Nanaimo, and at present mayor of the city, revealed the inter-
/"esting fact that, in Nanaimo, the question of abolishing the land tax is

receiving serious consideration. The situation, as explained by Mr. Planta,

i isjthat land values alone, with the present limitation of the tax rate, do not

N*^ forma base great enough to supply the necessary revenue for the city. The

(JiaN^ J assessment of land is at present very close to real values. There has been

] a little complaint because of the burden of the system, and the citizens, Mr.

/ Planta testifies, are quite willing to be taxed on the basis of land values up

I to the limit of the legal tax rate. Recently the city has been paying for as

I much of its work as possible on the^ Jrontap[e-tax bft^jfi. ^nd. by making

I generous use of this method, it may be found unnecessary to modify the

\ present tax base.

In summary it may be said that in such parts of British Columbia as
are not organized into municipalities, no special concessions are allowed for
improvements. Within municipalities improvements may not be taxed at
more than fifty per cent, of their value. Of the sixty-one city and district
municipalities, thirty-nine exempt improvements entirely and seventeen tax
them at the maximum rate allowed by law, fifty per cent. The practice
varies in the remaining five municipalities.

Until recently the movement seems to have been spreading. It should
be noted that for more than twenty years a general law has forbidden the
taxation of improvements in municipalities at more than fifty per cent, of
their value. The system is no new thing in British Columbia. It should be
observed also that the option as to whether further concessions be granted
to improvements rests entirely with the municipalities, an arrangement which
enables them to make the changes at times which seem propitious. By this
method British Columbia has avoided the difficulties encountered in Alberta.



174



1. Vancouver

THE CITY

Vancouver, with a population of 106,110, is the largest city in British
Columbia. Its population is rapidly shrinking, however, being smaller by
16,000 than it was two years ago.(l) Before 1886 Vancouver was a very
small settlement known as the Town of Granville. The city got its first
real start when in 1887 the Canadian Pacific Railway decided to bring its
terminal there from a point further up the inlet in order to secure the advan-
tages of a better deep-water harbor. It received another great impetus when
the Canadian Northern Railway and the Grand Trunk Pacific Railway
decided to use Vancouver as a western terminal.

Vancouver is located on the north edge of a tongue of land extending
west into navigable salt water. This strip is approximately five and a half
miles wide between Burrard Inlet on the north and the Fraser River on the
south. The tip of this. tongue of land is split by Enghsh Bay and False
Creek. The city lies along Burrard Inlet and around English Bay and False
Creek. It occupies an area irregular in width, the widest point being
approximately three and a half miles. The city stretches east and west for
a distance of about eight and one-half miles.

In several respects Vancouver resembles New York. Its business sec-
tion is crowded into a relatively narrow district between False Creek and
the inlet, so that the relationship of the business section to navigable water
is not unlike that in lower Manhattan. Another resemblance lies in its
position in regard to suburbs. Seldom does so large a proportion of the
people whose business interests are centered in a city live outside the cor-
porate limits as is the case in Vancouver. Across the inlet lies North Van-
couver, a separate . municipality, connected with the heart of the business
section of Vancouver by a five-cent ferry. To the east lies Burnaby and
to the south. South Vancouver and Point Grey, all separate municipalities
and all connected with the center of the city by street-car service. Most
of the people in all of these municipalities carry on business in Vancouver.
One passes from Vancouver proper to these separate municipalities without
noticing any change in the general development of the real estate. Eco-
nomically the whole peninsula is practically a unit. South Vancouver is
settled largely by workingmen from Vancouver. In Point Grey is the dis-
trict known as " Shaughnessy Heights," the choice residential section.

The large population of the suburbs is caused by the incorporation of
extensive areas as municipalities before it was possible to determine the
natural economic limits of the future cities. These corporate lines now
form very real obstacles to annexation proposals. Vancouver cannot extend

(1) In 1913 the fignre was 114,220, and in 1912, 122.100. The city census is made
annually by the assessment commissioner by means of a house-to-house canvass during
the last six months of the year.



175

her limits without affecting the limits of other municipal corporations. This
suburb situation not only has an effect upon the financial problem of Van-
couver but obviously it renders almost useless any comparisons on the area
or per capita basis with the prairie cities, where usually all the territory
that can possibly be construed as a part of the city is included within the city
limits.

Vancouver resembles New York, moreover, in its dependence upon the
transportation facilities for its economic welfare. First of all it has a fine
natural harbor and a great expanse of water front; 11,564 vessels entered
the harbor in 1913, representing a total tonnage of 7,380,472 tons. The
harbor is the historical reason for the establishment of the western terminus
of the Canadian Pacific Railway at Vancouver. Its transportation facilities,
moreover, are constantly being improved. A branch of the Great Northern
Railway reached Vancouver in 1908 and two Canadian transcontinental lines
are under construction which will depend on Vancouver for western terminal
faciHties. These are the Canadian Northern and the Grand Trunk
Pacific.(l) In addition to the steam roads the British Columbia Electric
Company has constructed an electric line about sixty miles up the Fraser
River valley which brings much freight to the city. Improvements are being
made in False Creek, a shallow, salt-water inlet, which will increase still fur-
ther the terminal facilities and available deep-water frontage of the city.
Part of the creek is to be filled in, most of the new land being divided be-
tween the Canadian Pacific and the Great Northern Railways. Vancouver,
moreover, is eagerly looking forward to the opening of the Panama Canal
which is expected to have a great influence in stimulating the economic pros-
perity of the whole Canadian West and consequently, of the great port of
the region. The shortening of the water route to Europe for grain, together
with the anticipated reduction in mountain rates due to the completion of
the new transcontinental railway lines, should, it is thought, turn westward
the movement of grain from the greater part of the prairie section. The
shorter water haul to Europe should also widen the market for British
Columbia fish and lumber.

Vancouver economic interests are, of course, closely related to those of
the entire province, and the interests of the province are centered chiefly
in the lumber, fish and mining industries. Such manufacturing enterprises
as exist are connected, to a large extent, with lumber or its preparation for
use in building. The development of the city is considered somewhat
" lopsided " because of this lack of manufactures, and strenuous efforts are
contemplated to induce manufacturers to establish themselves there. Van-
couver has a sugar refinery which employs some five hundred men, A bonus

(1) The main terminus of the Grand Trunk Pacific is nominally Prince Rupert
lying far to the north, and under the agreement by which the railway is being built,
no branch lines may be constructed until the main line has been completed. But
already, under a different name, the Pacific and Great Eastern Railway, a line is
being built connecting Vancouver with the Grand Trunk. Vancouver is expected to
receive more benefit from this road than Prince Rupert.



176

was given to secure this concern. There is also a large packing plant from
which much pork is shipped to Seattle. No new industries of importance
have been established recently. The high prices which are asked for land
are said to be one of the great drawbacks to success in the efforts of the city
to secure manufactures.

Among the natural resources of importance, from the point of view of
the prosperity of the manufacturers, should be included Vancouver's wealth
of water power. The companies which furnish this power are entirely in
private hands. In large quantities the current is supplied as low as one-half
cent per kilowatt hour.

An abundance of building material of all kinds is present, not only
lumber but large quantities of excellent sandstone, gravel, sand and brick
clay.

Wholesale grants of concessions to industrial enterprises, such as have
been given in some of the prairie cities, have never been resorted to in Van-
couver. Indeed the bonus to the British Columbia Sugar Refinery Co., Ltd.,
seems to be the only one ever given from public sources, unless the railway
concessions are considered bonuses. Bonds were issued to the amount of
$30,000 and the proceeds were used to purchase a site which was presented
to the refinery. Moreover, water was furnished free of cost for ten years
and for some time thereafter at a rate of five instead of seven cents. The
water supplied free of cost amounted to approximately $5,500 per year. The
Canadian Pacific concession of 1887 consisted of the exemption from taxa-
tion until 1918 of all unsold unsubdivided land belonging to the railroad in
the city. In addition terminal facilities on False Creek were recently granted
to the Canadian Pacific and the Great Northern Railways.

There has also been only a very small amount of artificial stimulation
to growth by public advertising. The ' official who has charge of this
work, the industrial commissioner, received from the city in 1914 a grant
of only $8,020. City grants during 1913 for such purposes amounted
to $22,000.

Much of the opposition to the present system of taxation is based upon
fiscal grounds. The financial history of Vancouver, and the general financial
situation must therefore be described in some detail.

The table which follows gives the total income, expenditure and balance
of Vancouver for each year from 1905 to date, a period including the last
two reductions in the tax on buildings. The figures represent the combined
General Revenue and Water Works Revenue accounts. Attention should
be called to the great growth in the amounts, the expenditure in 1913 being
nearly seven times the expenditure of only nine years before. The unfavor-
able balance at the end of 1913 of nearly a quarter of a milHon dollars
should also be noticed.



177

SUMMARIES OF THE CONSOLIDATED GENERAL REVENUE AND
WATER WORKS REVENUE ACCOUNTS



Income.



Expenditure.



Balance.



1905 ...
1906(a)

1907 ...

1908 ...

1909 ...
1910(b)

1911 ...

1912 ...

1913 ...



$696,333 17
916,148 71
1,280,646 24
1,447,173 45
1,695,705 62
2,366,518 71
3,013,930 30
4,008,762 30
4,386,526 27



$683,317 97
809,230 75
1,231,121 16
1,388,769 04
1,643,617 56
2,204,242 01
2.876,990 49
3,843,033 79
4,610,482 93



$13,015 20

106,917 96

49,525 08

58,404 41

52,088 06

162,276 70

136,939 81

165,728 51

Minus 223,956 66



(a) Assessment of buildings reduced to twenty-five per cent.

(b) Assessment of buildings eliminated.

How the income from the water works has regularly exceeded expendi-



Online LibraryRobert Murray HaigThe exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York → online text (page 18 of 31)