IWANUS: Assessment and tax reform, and the Real Property Tax Act

More ways the province's legislative framework around taxation can be improved

In his latest Tax Talk column, Jerry Iwanus highlights ways the province’s legislative framework around property taxation can be improved. (SUBMITTED PHOTO)

Outdated, unfair, and broken

The Real Property Tax Act is the most outdated, unfair, and broken part of the assessment and taxation system in New Brunswick, particularly the portion of the Act that enshrines the rate for the provincial portion of taxes. 

(Note that all properties are subject to the provincial portion of tax, but owner-occupants are eligible for the Residential Property Tax Credit on their primary residence, which means that they waive the provincial portion for those.)

The provincial government can and has changed this rate from time to time (particularly in response to skyrocketing assessed values in the past few years), but the problem is that it is enshrined in legislation rather than allowed to float based on budgetary need. 

Automatic tax increases

The most important thing to understand about the legislatively enshrined rate in the Real Property Tax Act is that provincial taxes automatically increase when assessments increase unless the government changes the legislation.  And changing provincial legislation anywhere in Canada is no mean feat.

When I worked in assessment in 2022, we found ourselves having to increase assessments dramatically — some as much as 100 per cent — both because of the strong market conditions and because assessors had not been able to “re-inspect” some property categories for a long time. This meant that assessors had to leave those properties chronically under-assessed, sometimes for many years.  

Eventually, assessors had to raise those under-assessments to market levels, and in the case of certain property types (particularly certain multi-family properties in 2022), this meant significant increases in a one-year period. In the absence of a reduced provincial rate, the government’s tax take (including the regressive “cost of assessment” rate) would have become a massive unbudgeted windfall.

Now, if the Real Property Tax Act were changed to allow the tax rate to float based on budgetary needs, there would have been no requirement for a legislated rate reduction. The rate would simply have been automatically set anew for what the government needed for its operations in that tax year. So how exactly does that work?