Property taxes are not user fees

From 2009-2012, Catalyst Paper fought their property tax bill in four B.C. communities: North Cowichan, Campbell, River, Port Alberni, and Powell River. Catalyst opted not to pay its taxes in these communities and ended up appealing its tax bill all the way to the Supreme Court of Canada. The essence of Catalyst’s argument was that the property taxes were too high and bore not relationship to the municipal services they actually used.

The Supreme Court of Canada (SCC) ruled on the case on January 20, 2012. The SCC dismissed the appeal essentially saying that municipalities can use any factors they deem necessary in setting tax rates, including not only how much municipal services are consumed, but also “social, economic, and political factors that are relevant to the electorate.”

What Catalyst was essentially arguing was that property taxes were user fees: they should only pay for what they consume. What the court was essentially saying is that property taxes are taxes, not user fees, and you pay for whatever the government wants you to pay for.

Given the wealth of case law that exists on user fees and taxes in Canada, I am surprised that Catalyst’s lawyers took the position they did. Their position was, in reality, indefensible. Despite this, this argument is quite common: that property taxes don’t reflect the benefits incurred by payers. In fact, it is the main argument used in several cases of condominium associations suing their respective cities for their property taxes being too high.

Let’s settle this once and for all: property taxes are not user fees. For taxes, there is no requirement for there to be a nexus between the amount charged and the amount of goods and services consumed. As I have written before, “a tax is a mandatory payment for the purpose of raising revenues not connected to the activity being taxed.” These frivolous law suits arguing that property taxes are user fees need to stop or the lawyers representing these cases need to come up with a better argument. At least come up with something that is not easily dismissed with a cursory reading of the case law!

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