An update on the layered cost of doing business in Calgary
July 2, 2019
In recent years, government policies have been making it harder to do business in Calgary. Highlighted in the Calgary Chamber’s 2017 report The Layered Costs of Government Policies, a myriad of policies from all three levels of government have layered costs on the business community. By making it more difficult to run a business, this “layered cost impact” has resulted in fewer job opportunities, higher prices, and is discouraging investment. These layered costs included but were not limited to: labour law changes, minimum wage increases, rising municipal property taxes, and Alberta’s Carbon levy. Combined these factors increased the median cost of doing business in Calgary across multiple industries.
With the change in provincial government earlier this year and municipal property tax bills making their way out to business, we take stock of how the proposed changes in the policies above change the layered cost impact in Calgary. Policies at the federal level have largely stayed the same, the provincial government has taken multiple steps in it’s short time in office to ease tensions around costs, and municipally, non-residential property tax bills have been a hot topic.
The first bill put forward by the new Alberta government was the An Act to Repeal the Carbon Tax. Tabled immediately after the Speech from the Throne, the repeal immediately removes transferred costs to local businesses. However, large emitters will still be subject to some carbon pricing through the proposed Technology Innovation and Emissions Reduction (TIER) regime that is yet to be implemented. The federal backstop will add some of this cost back on for businesses, however, the federal price is less than what the provincial price was. This will lead to some overall savings for businesses that can be reinvested.
Second, the provincial government introduced the Open for Business Act, and an order in council to introduce a Youth Job Creation Wage. Together they ease some of the labour law changes implemented by the previous government that increased costs for businesses and the Youth Job Creation Wage that allows a $13 minimum wage for full-time students aged 13 to 17. Working in tandem, these will roll back some of the costs faced by businesses across Calgary. The Act includes changes to holiday pay, qualifications for statutory holiday pay, overtime pay, and restores mandatory private ballots for all union certifications votes.
In addition to the specific costs mentioned in the Chamber’s report, the new provincial government has taken two additional steps that should further lower costs for businesses in the city. First, the Job Creation and Tax Cut Act will reduce costs for larger firms by establishing a one per cent tax cut for each of the next four years to bring the corporate tax rate to eight per cent. The Act maintains the two per cent small business tax rate, helping maintain costs for small businesses.
Another legislation introduced by the current government that would reduce costs for businesses is Bill 4, the Red Tape Reduction Act. As a result, businesses can expect a reduction in regulatory requirements for operating in Alberta, which should lead to a reduction of administrative costs for businesses.
While the steps taken by the provincial government shows leadership in reducing costs for operating a business in Calgary, we haven’t seen this leadership matched municipally. Non-residential property taxes, the main level the City uses to raise revenue, has been rising drastically in recent years. This year, 8,000 business properties are expecting to see a double-digit tax take for the 2019 tax year. While the increase will be cushioned by a last-minute Phased Tax Program (PTP) being implemented by the city, there are still concerns that remain. First, the PTP remains a short-term solution that does not address the long-term structural issues with the property tax system in our city. Second, there is no guarantee that the program will be there next year should costs increase again. Finally, it does not fix the current imbalance present in the city’s tax system. The system is still built around taking advantage of the large concentration of corporate offices downtown, many of which remain vacant today. To reduce costs for Calgary businesses, there must be a more equitable ratio struck between residential and non-residential properties. This lack of equity in the tax system has dramatically increased property taxes for businesses in Calgary and must be addressed to provide the certainty required for businesses to grow and thrive in the city.
We have seen policies that have a business cost associated with them diverge between the provincial and municipal level. Unfortunately, with this disconnect it is unlikely that the layered cost of doing business in Calgary will come down overall. In fact, unless bold action is taken by Calgary City Council, costs of doing business in Calgary may increase further. We need all levels of government to commit to making layered cost assessment a regular part of policy making. The joint federal election platform from the Edmonton and Calgary Chambers of Commerce’s will also advocate for more efforts at the federal level to assess and reduce layered costs upon businesses.
If layered costs are reduced, businesses will be to make growth and investment decisions that create jobs for Canadians, grow the economy, and contribute back into the health and wellness of all households and families.