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As a CPA and Tax Law expert, I’ve been closely monitoring the recent decision by the Calgary City Council to approve a 7.8% tax hike for 2024. While shifting a greater portion of the tax burden from businesses to residential ratepayers might seem beneficial for businesses at first glance, it’s essential to consider the broader implications, especially in the current inflationary environment.
The Tax Hike and Its Impact
The decision, resulting in a $16 monthly increase on average for Calgary homeowners, stems from the council’s initiative to fund 28 new investment priorities, including public safety and affordable housing. While these investments are commendable, the approach to funding them raises concerns. The shift to a 53:47 taxation formula, increasing residential property taxes, seems to overlook an important fact: many small business owners are also property owners. Therefore, this tax hike indirectly affects the small business community. Also consider the tax on the business side is deductible on federal and provincial income taxes, whereas personal property taxes may not be deducted and are paid with after-tax dollars.
The Bigger Picture: Inflation and Taxation
In an inflationary environment, where both individuals and businesses are grappling with increased costs, any additional financial burden can exacerbate the problem. The council’s decision, though well-intentioned in addressing city needs, might have unintended consequences on the economic well-being of its residents, including business owners. Tax hikes in such an economic climate can strain household budgets and, by extension, impact local businesses that rely on consumer spending.
Rethinking Tax Strategies
This situation highlights the need for a more holistic approach to taxation and public spending. Instead of shifting the burden between different groups, a more sustainable solution would be to explore avenues for reducing overall taxation. This approach would provide relief to both businesses and residents, fostering a healthier economic environment conducive to growth and stability.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2023 Shajani CPA.
Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.