LECTURE 6: REAL ESTATE TAXATION
Equity – the basic rule of equity in taxation is the equal treatment of equals.
Benefits Received – under this principle equity is interpreted as requiring that the
burden of taxation be allocated among taxpayers in relation to the benefits each
derives from public services.
Ability to Pay – under this principle equity requires the equal treatment of
individuals possessing the same capacity to pay taxes.
Adequacy – a tax system must be capable of providing the flow of funds that a
government requires in any given period.
Flexibility – a tax system should allow discretionary action to increase or
decrease the flow of funds as required.
Elasticity – a tax system should have taxes whose yield respond to changing
economic circumstances with deliberate changes in rates.
Balance – the need for a balanced plurality of taxes is grounded in the
requirements of flexibility and elasticity, partly in equity and partly in
Neutrality – taxes should result in the least price distortion possible. Neutrality is
violated if the revenue system imposes heavier taxes on some forms of business
organizations than others.
Certainty – the principle of certainty as to time, manner and amount of tax has
been advocated for centuries. Taxes that cannot be shifted are superior to any
taxes that can be hidden or easily shifted.
Simplicity – this principle dictates the greatest possible clarity within the limits set
by certainty and equity.
Convenience – this is significant in relation to the time, place and manner in
which a taxpayer is called upon to discharge their obligations.
Economy of Collection and Compliance – this applies both to the costs incurred
in collection and to the cost of taxpayer compliance.
Progressive Tax System: Individuals with higher income pay more. For
example personal income taxes
Regressive Tax System: Income makes no difference. Example would be HST
or provincial sales taxes.
MUNICIPAL REVENUE SOURCES Where do municipalities obtain their revenues?
• Development charges/ lot levies
• Federal/Provincial transfers
• Conditional/Unconditional Grants
• User Fees
• Licenses and Permits
• Other (Investment income, rentals, water, other taxes and income)
VARIOUS TAXES ON REAL ESTATE
Real Estate Tax Federal Provincial Local